by Stoyan Bojinov on June 11, 2014 | Updated July 2, 2014

In the world of finance, with innovation comes complexity, and ETFs are no exception to this rule even in light of their unparalleled ease-of-use and cost-efficiency. Given the sheer variety of options available, its no wonder that ETFs have found their way into countless portfolios and onto traders radar screens. While simplicity has proven to be at the heart of the exchange-traded product structure, there are still a number of nuances that must be taken into consideration before jumping into a position that are often overlooked, even by experienced investors [see also 101 ETF Lessons Every Financial Advisor Should Learn ].

At ETFdb.com, weve long been proponents of Looking Under the Hood, that is to say, doing your research and making sure that you thoroughly understand the objective, risks, and quirks associated with an ETF before logging into your brokerage account to place a limit order. Some of our most popular educational pieces that dive deeper into examples covering the often overlooked nuances associated with certain funds include:

• ETF Misnomers: Why You Never Judge a Fund by its Cover
• 10 Questions About ETFs Youve Been Too Afraid to Ask
• 25 Things Every Financial Advisor Should Know About ETFs

Below, were expanding upon the theme of digging deeper and uncovering three peculiar cases where the so-called fine print  reveals some surprising quirks about ETFs that you may be considering or already holding in your own portfolio.

What Is My ETFs P/E Ratio? 

The price-to-earnings ratio is among the most popular valuation metrics out there. If youre an ETF investor, its safe to say that youve at least referenced the P/E ratio when researching and comparing funds, but have you considered the calculations behind an ETFs pricing multiple? Lets consider the iShares lineup for this example. Suppose youre thinking about making an investment in the well-known Nasdaq Biotechnology ETF (IBB ), but youre worried about buying in at a time when valuations might be too high. Naturally, youre going to reference the funds P/E ratio, compare it to the broader market, and perhaps compare it to that of industry leaders.

In the case of IBB, its P/E ratio stands at a little over 40 at the time of writing. However, a closer look at the fine print on the iShares website regarding how this valuation metric is calculated serves as an excellent reminder of why its important to pay attention to the details. The fine print reads, Negative earnings are excluded, extraordinary items are excluded, and P/E ratios over 60 are set to 60. Being aware of this may seem trivial to some, but if you rely on the P/E ratio in your decision making then knowing this nuance is tremendously important. The lesson here is to read the fine print about how certain metrics are calculated, whether its P/E ratios or dividend yields, because every issuer has their own way of running the numbers so to say.

A Little Known Fact About UITs

If you don’t know what a UIT is, you might be surprised to learn that some of the most popular ETFs out there are actually structured as UITs. Popular funds like the SPDR S&P 500 (SPY ), QQQ (QQQ ), and even the Dow Jones Industrial Average ETF (DIA ), are all structured as united investment trusts, UITs for short; for the most part, these instruments are structured and behave like ETFs, except when it comes to certain specifics like creation of units  [see also  Ten Commandments Of ETF Investing ].

There is another quirk that may surprise even those familiar with UITs; all UITs have a mandatory termination date. That is to say, outlined in each of the funds prospectus is a termination clause. There is no reason to panic, seeing as how this mandatory closing date is set out over a century from now, 2118 and 2124 for SPY and QQQ, respectively.

While in this instance overlooking the fine print may not lead to severe, or even any, consequences, the lesson remains the same: you should always be aware of the quirks and nuances associated with a product before investing, because there will come a time when the details will matter, and you don’t want to be caught off guard.

The Hidden Costs of Commission-Free Trading

Don’t get us wrong, at ETFdb.com we love commission-free ETFs as much as the next trader or investor; in fact, we’ve even constructed all-ETF, commission-free model portfolios for each of the most popular trading platforms to demonstrate the cost-saving potential. However, there is a nuance associated with commission-free trading that may end costing you a lot more than the brokerage fee you’re looking to escape [see also The Cheapest ETF for Every Investment Objective ].

If you haven’t heard of or come across the “short-term trading fee,” it’s probably because you haven’t read the fine print about trading commission-free ETFs. Popular online brokers including E*Trade and TD Ameritrade offer rosters of funds that are eligible for trading at no cost. Digging deeper into the brokerage fees fine print, however, you’re likely to come across something along the lines of “to discourage short-term trading, you may be charged a short-term trading fee on sales of participating ETFs held less than 30 days.”

In other words, if you don’t read the fine print and you end up buying then selling an ETF that falls on your brokers commission-free list within 30-days, you may end having to pay more than the very same brokerage fee you sought to avoid in the first place.

The Bottom Line

Reading the fine print doesn’t guarantee you will uncover some great detail that makes you change your mind altogether about an investment product; it does, however, instill the habit of being diligent. Remember that investing is a lifelong learning process and success is dependent upon being disciplined over time. That is why it’s important to take a moment and consider the details in every aspect of the investment process, because by paying attention to the fine print you’re less likely to make uneducated decisions that may prove costly.

Follow me on Twitter @Sbojinov

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Disclosure: No positions at time of writing.