How do ETFs make money?

When people ask how ETFs "make money," they often mean how the ETF sponsor (the issuer) earns revenue. The main source is the fund's expense ratio, which is deducted from the fund's assets over time. (sec.gov)

Some ETFs also earn revenue from securities lending, where the fund lends certain holdings to borrowers (often for short selling) and receives fees. Policies vary by issuer, and revenue may be shared with the fund (benefiting shareholders) depending on the structure.

For investors, the important takeaway is that fees are real and compound over time. Two ETFs can track similar exposures but have different costs, tracking quality, and lending policies, all of which can affect your net returns.