With MERs (Management Expense Ratios) being very low on index tracking ETFs (for example Vanguard charges a piddly 0.07% MER on VTI – Vanguard Total Stock Market Index ETF), you wouldn’t think there could be ways to offer still cheaper ETFs.
Did you know there is now an ETF out there with an MER of 0.00%? Don’t believe me? Then click here to learn more about the db x-trackers DJ Euro Stoxx 50 Index ETF. (You may have to click a box to accept the terms for use of the website and then reload the page.)
Of course, if anyone actually believes that this ETF is not designed to make the company money, you are unfortunately mistaken. Part of the reason they can charge a 0.00% MER is that the revenues from securities lending more than offsets the cost of running the fund. Securities lending means the fund lends out stocks in the fund to short-sellers (who need to borrow stocks in order to short sell them). The fund collects interest on the lending of these stocks.
This is exactly what Larry MacDonald had proposed (tongue in cheek) in a blog post of his some time ago…