What do most mutual funds have that most ETFs don’t? Active management. Portfolio managers run most mutual funds, buying and selling stocks and bonds with the aim of maximizing gains and minimizing losses.
The problem is that most active managers often don’t outperform their benchmark index in the long run. That raises the question of why pay more for a mutual fund if it doesn’t beat its benchmark index that’s a lot cheaper to own?
That might help explain why five of the 10 biggest U.S. diversified stock funds tracked by Morningstar Direct are index funds, led by Vanguard Total Stock Market Index (VTSMX) with $827 billion in assets, including all shares classes.
In addition a lot of ETFs also have dividends and options. So I can buy an ETF and sell a out of the money call on it to generate additional income while holding on to it with at least the dividend to offset any downside. Every % counts.
bmp
Never buy mutual funds. The big reason is that you pay taxes every year on them. ETFs grow tax free. Its like an IRA with no rules. You just buy SPY and forget it. Your money grows tax free with extremely low fees and you don’t pay taxes until you sell them.
With Mutual funds you have higher fees and then you have to deal with a 1099 every year. Then you have to figure out your cost basis. What a pain. Plus the fact that you have a day delay before you can get out. Oh, and if you look at a bunch of mutual funds (not all), they have ETFs inside them. So they are just hiding their ETF inside a mutual fund and still charging you the ETF fees and the mutual fund fees.
It would be interesting to see if the Authorized Partners arb the ETFs to the NAV during a liquidity crisis. I don’t believe they’re obliged to do so.
It won’t matter which you own, funds or etf’s if Trump is not re-elected. Everything will crash, except perhaps gold.
Ping and:
From what I have seen in a non rigorous analysis but merely observation, what ETFs lack in management “advantage” is easily made up for in fees paid to mutual fund management. Ditto for financial managers. That is considering sane portfolio management as a long term investment and not a trading account.
Wall Street and money management are mostly just a scam to skim 1% of assets or more off the top of your hard earned savings each year.
A diverse portfolio of closed end funds has provided us a very substantial retirement income in dividends over the last four years, while keeping up with the S&P before withdrawals. There is a lot of scary-sounding propaganda against CEFs out there, none of which I find to be true. Very similar to picking dividend stocks, but with twice the dividend.
Bookmark.
Timing made me more profits than worrying about which fund or ETF to trade. As a long term trader, I buy sectors which are selling at discount. For example when oil was under $30/barrel, it was time to load up on energy sector mutual funds/ETF’s. When the whole market is 25-30% below previous high’e, it is time to load on S&P index funds. Again, this strategy is for long term traders (3-5 years).
WTF is an ETF?? If you’re gonna use an acronym....DEFINE IT. The definition should happen with THE FIRST USE OF THE ACRONYM in the piece of writing (and yes, damn it, I’m shouting).
also, ETFs are WAY simpler when it comes tax time ...