Comments on: ETFs vs. Index Funds (revisited)

By: Sammy_M

Sammy_M — Sun, 23 Oct 2011 17:14:53 +0000

ETF’s bid-ask spreads widened substantially during the last liquidity crunch IIRC. If there is a big downturn and spreads widen on everything, I don’t care so much about the spreads on equity ETFs because I’m on the bid side of those. However, I’m selling bonds to buy those equities so am on the ask side there. For this reason, I prefer bond mutual funds over ETFs.

By: fpruitt

fpruitt — Thu, 20 Oct 2011 06:19:50 +0000

One advantage of and ETF vs Index fund is if an investor wants the Vanguard FTSE international small cap index.

By buying it as an ETF (ticker: VSS), you get a lower expense ratio (.33%), commission free thru Vanguard Brokerage, and avoid the purchase fee that is assessed by Vanguard, if it is purchased as a mutual fund share class.

By: eva

eva — Wed, 19 Oct 2011 16:09:38 +0000

For investors with low balances, such as young folks with just a Roth IRA, commission-free ETFs make sense since you can’t meet the mutual fund minimums.

By: Mike

Mike — Mon, 17 Oct 2011 16:03:05 +0000

Hi John.

That’s a great point about rebalancing. Thank you for bringing it up.

By: John

John — Mon, 17 Oct 2011 15:59:29 +0000

Mike,
Nice summary. I moved a lot of my portfolio to ETFs a couple of years ago when costs were more of an issue than they are today, as you point out. One additional aspect of the ETF / Mutual Fund debate is in regard to “rebalancing.” I find it a little more difficult to rebalance using ETFs. With Mutual Funds, all one needs to do is move the dollar amount from one asset class to another if their portfolio gets out of whack with their desired asset allocation. With ETFs, you first need to sell from one ETF, have the money go to a sweep account and then buy into the desired ETF to get your portfolio back on target.