3 Zero-Fee ETFs Worth More Than Their Cost

Key Points

• Zero-fee and ultra-low-fee ETFs are proliferating, but investors should still weigh brokerage costs, liquidity, and transaction expenses before assuming they are truly free.
• BKLC offers broad U.S. equity exposure with REIT inclusion and low fees, though its smaller asset base and trading volume may raise liquidity-related trading costs.
• EDGX offers a 0% net expense ratio through a temporary waiver and targets a 9% annualized distribution via covered calls, but its strategy remains largely untested.

The race to the bottom in the exchange-traded fund (ETF) price war has reached its (presumable) final destination, with a growing number of funds available to investors for no annual fee. These zero-fee funds and their ultra-low-fee competitors have the potential to improve long-term returns because they leave as much of the portfolio's return with the investor as possible. They make diversifying especially easy and inexpensive, and can still oftentimes offer robust exposure to a variety of sectors and industries.

On the other hand, zero-fee funds are not necessarily completely without cost, and investors may still have to pay brokerage expenses, transaction costs, and other indirect charges. It's therefore critical that investors not simply assume that a zero-fund fee actually costs them nothing. These funds, like all others, still need to make the case that they are worth more than they cost. Between broad portfolio access, a low-cost income strategy, and some of the least expensive access to the S&P 500, the ETFs below may make a compelling case that they bring more value to the table than their fees would suggest.

BKLC Provides Some of the Cheapest Exposure to the U.S. Equities Space, But Beware Liquidity

The BNY Mellon US Large Cap Core Equity ETF NYSEARCA: BKLC may appeal to investors for its broad exposure to U.S. stocks. The fund attempted to make up for its relatively late entry to the U.S. equities space by undercutting competitor fees. Crucially, BKLC also includes real estate investment trusts (REITs) in its basket, a category that many other broad funds tend to avoid.

BKLC is not the most diverse fund available, but its more than 500 positions do give access to a wide swath of the U.S. market. It is unsurprisingly dominated by tech names like NVIDIA Corp. NASDAQ: NVDA, with the tech sector receiving 38% allocation overall, but the fund also holds financials, communications, health care, and more.

As of mid-September, BKLC has very slightly outperformed the S&P 500 with a year-to-date (YTD) return of 11.7%. One potential trade-off investors should watch out for, however, is the fund's smaller asset base and trading volume compared to other broad U.S. ETFs. This can lead to liquidity impact that may end up costing active investors more in trading fees.

An Actively Managed, Income-Generating Fund With No Fee...For Now

With a net expense ratio of 0%, the Global X U.S. 500 Income Edge ETF NYSEARCA: EDGX is one of the newest entrants to the zero-fee fund space. This fund has a significant caveat: its gross expense ratio is 0.50%, but the fund issuers have waived expenses through at least the beginning of March 2027. For this reason, EDGX is not a true cost-free ETF, and it may not appeal to buy-and-hold investors seeking the best deals.

However, the current waiver significantly enhances EDGX's appeal as an income-generating fund. It stands apart for its dynamic covered-call strategy, which allows it to sell call options on some of its holdings in an attempt at generating a 9% annualized distribution rate.

EDGX has a dramatically different approach from most other zero- and low-cost funds, and it's exceedingly rare to find an actively managed fund trading for an effective 0% annual fee. On the other hand, though, its strategy is largely unproven, as it has only traded for just over half a year, and it has a vanishingly small asset base and tiny trading volume. Investors may see the appeal of the fund now, but the calculation could change if and when the fee waiver goes away.

SPYM Takes an Opposing Approach With Ultra-Cheap Access to the S&P

The field of S&P 500-focused funds is quite large, but the State Street SPDR Portfolio S&P 500 ETF NYSEARCA: SPYM keeps things simple by offering direct exposure at a very low expense ratio of just 0.02% per year.

SPYM is one of the cheapest ways for investors to gain access to about 80% of the U.S. stock market. The fund holds just over 500 positions, in line with other S&P funds, and so the primary distinguishing factor here is assets under management and trading volume.

SPYM is robust in both categories—it has about $170 billion in managed assets and a one-month average trading volume of more than 13 million shares. Investors will want to compare this fund against competitors offering a very similar proposition but at a different price point: State Street's flagship SPDR S&P 500 ETF NYSEARCA: SPY has some $800 billion in assets and more than triple the average trading volume, but it also trades at an annual fee of 0.09%. With performance that is essentially the same, it may come down to transaction costs versus annual fees.