Why You Want a High-Volume ETF

Ignoring trading volume in ETFs can prove costly for investors.

TheStreet.com Ratings examined selected data from ETFs with high average daily turnover vs. those with low trading volume. The study revealed that funds with heavier trading activity tend to save their investors in annual expenses as well as in some crucial trading-related costs.

As can been seen in the accompanying table, the 50 ETFs with the lowest average trading volume over the period from December 2007 through January 2008 saddled their holders with a median annual expense ratio that was more than double that of the 50 ETFs with the highest average daily turnover for the period.

This seems logical, as heavier trading volumes would normally seem to be associated with larger funds that can spread expenses over wider ownership bases. ...