Fund Volume
💡Take Away
The fund size describes how much invested money is in an ETF.
ETF providers may remove ETFs from the market if they perform poorly. This risk is higher for new and small ETFs. We recommend ETFs with a fund size of at least €100 million.
ETFs with a large fund size usually have lower costs due to economies of scale.
If an ETF is liquidated, you will receive your money back and can reinvest it in a new ETF.
The more, the better
The fund size describes how much money all investors have collectively invested in an ETF. The higher the volume, the lower the fixed costs for the fund providers. These lower costs can then be passed on to investors.
ETFs with a high fund size often have a low Total Expense Ratio (TER). This scaling effect benefits you because it reduces the portion of your returns eaten up by costs.
Some ETFs of large fund size:
Providers test ETFs in a kind of trial period
Currently, over 2,900 ETFs are approved in Germany alone. Some of them focus on specific niches, industries, or regions. However, not all of these ETFs are successful in the long run.
That’s why providers test how an ETF performs over a certain period. If it fails to establish itself or does not attract enough capital, the provider may remove the ETF from the market.
What happens when an ETF is liquidated?
When an ETF is liquidated, the invested capital is sold off and returned to the shareholders. As an investor, you do not lose your money, but you will need to find a new ETF. However, reinvesting your money may incur additional costs.
If an ETF is set to be closed, the provider will notify you in advance. The notice period is six weeks. During this time, you should look for a new ETF that aligns with your investment goals. Once you have found a suitable ETF, you can reallocate your investment. After the notice period ends, the provider stops trading the ETF and liquidates it. Your previously invested capital is then returned to your brokerage account.
The Right Fund Volume
Experts assume that a fund volume of at least 100 million euros makes an ETF profitable for providers. From this point, an ETF is also relatively safe from liquidation.
As a rule of thumb, the larger the fund volume, the more established, liquid, and secure the ETF is. For niche ETFs, the fund volume may be smaller, but the management costs are usually slightly higher.