FTFM The beauty of an exchange traded fund is that you get precisely what you are expecting: the return of the underlying index. Except that there will be a tracking error.
It turns out that it is not as straightforward to run an ETF as the initial marketing pitch would have you believe. Even in the best-case scenario, where the underlying index is very liquid, there will be transaction costs. These can be minimised by reducing the frequency of rebalancing, but that increases the variation of the ETF from the index.
