Glossary
What is the bid-ask spread on an ETF?
Updated Reviewed quarterly
The bid-ask spread is the gap between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask) on an exchange. Liquid ETFs like SPY have a 1-cent spread. Thinly-traded ETFs can have spreads of 5–20 cents. Every time you trade, the spread is an effective hidden cost.
For NZ buy-and-hold investors who trade rarely, the bid-ask spread matters less than the expense ratio — the spread is paid once per trade, the expense ratio every year. For active traders, tight spreads on high-AUM ETFs (SPY, QQQ) can save thousands over many trades. NZX-listed ETFs trade in lower volume than US ETFs, so spreads on Smartshares and Kernel funds can be wider — check the depth on the NZX site before placing a large order.
Where you’ll see this term