How does the market adjust for fees in ETPs?
"Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF.  The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market.  Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying.  ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs.  Typically, ETF providers do not even do their own trading.  They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs.  In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF.  Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this.  Note that even if they had no costs, their maximum upside would be a few basis points per year.  Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees.  Two things about your suggested outcome are incorrect.   If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them.  In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling.  The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose.  At first brokers start charging additional fees.  As borrowable shares become harder to find, they require that you obtain a ""locate,"" which takes time and costs money.  Finally they will not allow you to short at all.  Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers.  There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying.  This would drain down the underlying asset pool until it was empty.   In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices." The market doesn't really need to adjust for fees on ETF funds that are often less than 1/10th of a percent. The loss of the return is more than made up for by the diversification. How does the market adjust for trading fees? It doesn't have to, it's just a cost of doing business. If one broker or platform offers better fee structures, people will naturally migrate toward the lower fees.
"It really depends on the value your financial adviser provides.  Does he help with your 401K?  Does he help you avoid making foolish moves?  Does he really help you find funds that beat average market returns? Many people answer ""no"" to all of these questions and do their investing on their own.  I personally prefer Fidelity because I find their web site easier to work with, but Vanguard is another option.   At Fidelity you will have zero fee per year.  You can buy Fidelity and many other mutual funds with no cost.  You can buy iShares ETFs at no cost.  Some funds do have a fee to purchase, but they are pretty low ($35) and are only collected when you buy, not yearly.   Now some people do go it alone and it is a huge mistake.  The news tends to only report negative stock market events, and many people were scared away from 2008 and missed wonderful gains since that time.  If you pull your money out during corrections, stick with a financial adviser.  If you will stop contributing because of a correction, stick with a financial adviser.  In those cases the fee is well worth the cost.  Also if your guy provides education in association with investment advice, the fee might also be worth it.   If you are able to stomach losses, able to keep on contributing like clockwork, and can read a Morning star mutual fund chart, then you might be best to go it alone.  One thing would really help is to have a friend that is also interested in investing to share ideas with." It is perfectly legitimate to adjust your 1099-B income by broker's fees.  Publication 17 (p 116) specifically instructs taxpayers to adjust their Schedule D reporting by broker's fees: Form 1099-B transactions.   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B or substitute statement from the broker. Use the Form 1099-B or the substitute statement to complete Form 8949. If you sold a covered security in 2013, your broker should send you a Form 1099-B (or substitute statement) that shows your basis. This will help you complete Form 8949. Generally, a covered security is a security you acquired after 2010. Report the gross proceeds shown in box 2a of Form 1099-B as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. However, if the broker advises you, in box 2a of Form 1099-B, that gross proceeds (sales price) less commissions and option premiums were reported to the IRS, enter that net sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. Include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). If you include an expense of sale in column (g), enter “E” in column (f). You can rely on your own records and judgment, if you feel comfortable doing so.  Brokers often make incomplete tax reporting.  This may have been simpler from their perspective if the broker fees were variable, or integrated, or unknown for a number of clients party to a transaction.  If a taxpayer has documentation of the expenses that justify an adjustment, then it's perfectly appropriate to include that in the calculations. It is not necessary to report the discrepancy, and it may increase scrutiny to include a written addendum.  The Schedule D, Form 8949, and Form 1099-B will probably together adequately explain the source of the deduction. If you are looking to begin living off the money now, then Dheer's answer is correct - it is not possible. However, if you are looking to grow that money (and potentially additional money added at later dates), then you could make this work. 250 a month corresponds to 3000 per year. A first approximation is that you will need a diversified portfolio of 20-25x that amount (60k-75k) to get the required return. This approximation is based on the rule of thumb for how much life insurance to buy. Therefore you need to determine how to grow the 4k you currently have into 60-75k. These numbers, however, are not adjusted for inflation. In the US I would like put the long term inflation adjust diversified market return at 4% per year (your money doubles about every 18 years). So your best approach if you have time is a diversified portfolio with rebalancing and adding additional money each year. "What does ""points"" mean In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out.  A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is ""X"". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily. S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes." No, the expense ratio would be something you wouldn't be charged. If you bought shares of the ETF long, then the dividends are usually reduced by the expense ratio if you wanted to know where to find that charge in general. You would have to make up for any dividends the underlying stocks as part of general shorting since the idea is that once you buy to put back the shares, it has to appear as if they weren't missing in the first place. No, the authorized participant would handle changes to the underlying structure if needed. Merrill charges $500 flat fee to (I assume purchase) my untraded or worthless security. In my case, it's an OTC stock whose management used for a microcap scam, which resulted in a class action lawsuit, etc. but the company is still listed on OTC and I'm stuck with 1000s of shares. (No idea about the court decision) If the company has a direct reinvestment plan or DRIP that they operate in house or contract out to a financial company to administer, yes. There can still be transaction fees, and none of these I know of offer real time trading.  Your trade price will typically be defined in the plan as the opening or closing price on the trade date.  Sometimes these plans offer odd lot sales at a recent running average price which could provide a hundred dollar or so arbitrage opportunity. You buy something on margin. It goes down. You get a margin call.  It's not more complex than that. The value of your account has to be X% of the asset you control. The fact that the ETF is bull, bear, triple long/short, doesn't really matter.