The question
My broker says ETF trades are free. So why does my account show a little less than I paid, the moment I buy?
The idea
- Lesson 2 introduced the bid, the ask and the spread between them. When you buy, you pay the ask; when you sell, you get the bid. So a round trip, buying and later selling, costs you the whole spread.
- Nobody bills you for it, so it never shows as a fee. But it is real money, earned by the market makers: trading firms that stand ready to buy from you at the bid and sell to you at the ask. ETFIQ shows each spread as a percentage of the midpoint (the price halfway between bid and ask), so funds at different prices compare fairly.
Worked example
The 5 steps beside the drawing at the top work this through on ETFIQ data. Point at a step to light the part of the drawing it describes.
The same two ETFs as lesson 2, both near $60 on Nov 10, 2026: NOBL (a large dividend fund) and TINY (a small nanotechnology fund).
The spread is the same idea in both funds. What changes the answer is how wide it is and how often you pay it.
The common mistake
"My broker charges no commission, so trading is free." A commission is a fee your broker charges for placing the trade. Many brokers now charge none. The spread is a different cost, built into the price itself. You pay it on every trade, at every broker. In a fund like TINY, it can be bigger than everything else you pay.
Check your understanding
Pick an answer to see why. Two of three right passes the lesson.
1. A fund's bid is $30.00 and its ask is $30.06. What is its spread, as a percentage of the midpoint?Answer: B. 0.2%. the midpoint is $30.03, and $0.06 ÷ $30.03 ≈ 0.002, which is 0.2%. Not D: 6 is the spread in cents, not a percentage.2. A fund has a 0.40% spread. You buy and later sell $5,000 of it, four times in one year. What do you pay in spread?Answer: D. $80. each round trip costs the full spread: $5,000 × 0.40% = $20, and 4 × $20 = $80. Not C: $40 counts only half the spread each time, the buy side or the sell side, not both.3. Your broker charges $0 commission. Which is true?Answer: B. You still pay the spread. the spread is built into the bid and the ask, whatever your broker charges. Not A: no commission is not no cost; the buy happens at the ask and the sell at the bid.
Takeaways
- Turn any spread into dollars: amount × spread is the cost of one round trip.
- Check the spread beside the fee; in a thinly traded fund, one round trip can cost more than a year of fees.
- The more often you trade, the more the spread matters.