Index/mutual funds versus ETF/spdr

User Forum Topic
Submitted by flu on November 9, 2012 - 7:11am

In the past, people have traditionally favored mutual funds/index funds versus ETFs for various reasons.

I'm curious what's your take on the entire ETF versus mutual funds (if you had to chose between the two)...

Pros for funds:

1. Generally lower cost per unit cost
2. Wider selection of mutual/index funds versus ETF
3. no transaction fee
4. sometimes tax benefits

Cons for funds:
1. More difficult to exit a fund (takes 1 business day to close position)
2. Generally cannot move in/out of fund quickly

I'm just thinking that while funds generally have been good in the past, the inability to enter and exit the fund quickly makes them sort of more dinosaurs of today, when market volatility is implied. Also, before ETF's cost considerably more due to the transaction costs associated with buying/selling stocks from a brokerage. But it seems like most brokerages have such a cheap commission rate, this becomes a moot point...

For example, selling a position in an S&P index fund traditionally doesn't complete until the close of a business day...And once sold, often times companies have a 90 day window before you can buy back into the fund... On the other hand an S&P index ETF can be exchanged immediately (subject to brokerage commission)....

Thoughts?

Submitted by flu on November 9, 2012 - 7:16am.
Submitted by UCGal on November 9, 2012 - 7:36am.

I'm mostly mutual funds. But I've given up trying to time the market. I set my asset allocation and rebalance when it gets out of wack. I follow the bogleheads lazy portfolio and it's been better than when I tried to time individual stocks.... and lower cost.

Submitted by The-Shoveler on November 9, 2012 - 7:38am.

ETF

I just like the Idea of being able to get out A.S.A.P. when the shit hits the fan.

Submitted by flu on November 9, 2012 - 7:50am.

UCGal wrote:
I'm mostly mutual funds. But I've given up trying to time the market. I set my asset allocation and rebalance when it gets out of wack. I follow the bogleheads lazy portfolio and it's been better than when I tried to time individual stocks.... and lower cost.

What are you looking at in terms of cost on the indexes. I think Schwab just dropped their expense costs so they are actually lower than vanguard right now.

Submitted by UCGal on November 9, 2012 - 8:47am.

I'm in Schwab index funds... so super low costs.

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