“The expense ratio is 0.4% which is less than the loss on a bid/ask spread or bank buy/sell rates.”
A bid/ask spread of 0.4% is high-normal, usually found in smaller cap stocks. For example, on a large cap stock, one might well see bid $100.00, ask $100.02. That is 0.02%
The ETFs have bid-ask spreads of their own. These spreads can be quite large for the small cap, thinly traded ETFs.
The fees are not one-time, as in the purchase or sale, but are annual. 0.4% is a significant rate margin. Yes, it is better than most mutual funds, even low cost ones, but it is still significant. If you are seeking 4% yields, and you lose 0.4%, well, that is 10% of your return!
If you attempt to actively trade bonds, you will endure a lot of transaction costs, and in this case an ETF or mutual fund would be better. If you buy and hold to maturity, and you can find bond dealers able to sell you bonds at decent YTMs (i.e. not taking too much margin for themselves), that is ultimately the best route.
Since you are holding in a tax-advantaged account, some would recommend buying mutual funds instead of ETFs. One headache of mutual funds is their distribution of capital gains, making tax reporting difficult. ETFs do not have that issue. On the flip side, mutual funds do not have the bid/ask spread, and on some thinly traded ETFs that can be a real issue. Also, there are many more international mutual funds than international ETFs.
A lot also hinges upon how large of individual transactions you are able to offer. If you can have a diversified portfolio with $100K+ transactions, you will probably be able to do better with individual securities than with funds. If slicing up your portfolio left you with $10K individual investments, you are probably better off with funds.
This is all regarding fixed income; foreign equities can generally be traded via ADRs; the capital does not need to leave the US$ at all.
That is about the extent of my knowledge of foreign investing. If I learn something significant I’ll post it.
