How to find the trading costs in an ETF prospectus
As a case of study, I'm reading information about Vanguard's VUSA. Currently, I'm trying to find out what are the ETF's trading costs.
I have read the Key investor information and the ETF's prospectus. According to the first document, the only expenses is the ongoing charge (of course I don't believe it)
The only thing I have found in the prospectus is the Cash Creation/Redemption Fee, which is 2.00%. Is this the fee the investor needs to pay every time he buys more ETF's shares?
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An ETF can't charge trading costs because the fund management does not even know when you buy or sell it. ETFs are traded like shares in stock companies. If you buy ETF shares from someone the fund managers have nothing to do with it. That's why you can't find trading costs in the prospectus.
Retail investors typically have to pay a transaction fee on every transaction to their stock broker. Different brokers charge different fees, and there are more and more online brokers who offer ETF trading for free. So you have to check out the stock brokers' fee tables for your research.
The cash creation/redemption fee refers to the cost if someone wanted to create a new share of the fund, not the cost of buying/selling an existing share.
At least in the US, trading commissions depend on which custodian/broker you use to buy the fund. Two investors buying the same fund through different platforms may pay different trading commissions.
Edit: Also, the bid-ask spread portion of trading costs is determined by market conditions. It is not fixed.
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