Comments on: ETF’s Versus Index Funds & the 5 Big Differences to Consider

By: jskjudith

jskjudith — Sat, 20 Aug 2011 18:42:16 +0000

I have had good luck with the etf option. I watch my holdings closely and pay $7 for a trade. During those days when the market shoots up and an ETF may gain 4% I take what I need that week and pay my bills. When an ETF looks cheap but I feel it is a good group, I buy and that is usually when there is a 2% drop. I buy and sell during the day and so far, whatever the market is doing, I am making a profit. I don’t use anything but common sense and I like the way it is working.

By: ETF Trading

ETF Trading — Wed, 16 Jun 2010 18:40:18 +0000

A lot of new etfs have come on-line since this post was first published. However, trading the broader market etfs are probably still appropriate for most people. Trading the S&P 500 is easy with SPY. And, to save on trading fees, the big investment firms now offer their own brands of SPY. Schwab now offers an S&P 500 etf that incurs no trading fees.

For those who want to trade or invest a bit more aggressively, trading the “inverse” and “double” etfs can be the ticket. ProShares offers SSO for 2 times the return of SPY. For those who want to short SPY, SH is the inverse of SPY and SDS is the double inverse of SPY. These inverse etfs are perfect for retirement accounts where shorting is not allowed.

By: index funds

index funds — Wed, 09 Sep 2009 06:18:36 +0000

Index funds seem to be quite a good investment option, though they don’t give you whooping returns, over a period of time they grow steadily to give you good returns. There are some merits like, You get the cream of mutual funds, Don’t have to keep a track of individual stocks, Indexed funds are better performers than active funds, like this there are some demerits also such as, it is expensive stocks, Stocks only from within index range. For detail information on these points refer http://www.financialculture.com/pros-and-cons-of-investing-in-index-funds/

By: Morgo

Morgo — Mon, 05 Jan 2009 02:41:30 +0000

I have been using ETFs since January 2008. I set up an account with Sharebuilder. I can make monthly, automatic deposits to my account and set a price at which to buy automatically. The money in my account sits in a money market account until I accumulate enough. This way, I can practice dollar cost averaging but set my investment amount high enough to justify the $4.00 buying commission fee. I also have my account set up to reinvest my dividends, which is a nice feature.

By: John Doe

John Doe — Tue, 23 Dec 2008 02:24:53 +0000

@Jacqui

TdAmeritrade allows you to DRIP. That is a major reason I am with them.

By: Seth

Seth — Mon, 22 Dec 2008 18:50:56 +0000

I personally use both but generally recommend mutual funds. The problem I have with most ETF’s is the broker fee eats into a lot of tax/fee savings unless you’re investing a lot. So, if I’m doing a one time purchase on say 3k or more then I might do the ETF.

That said, if it’s something I plan to keep investing in then I typically go with the mutual fund. I almost exclusive use Vanguard for my funds. Yes, the minimum of 3k on most of their funds is high if you’re just starting to invest. Then again, if you don’t have 3k to invest you’re probably better waiting to save up a bit more versus trying to buy anything and paying the broker fees on it. Ah, but once you have the 3k you can buy any number of funds! For a first fund I would go with either an S&P or Total Market type fund, or maybe a target date retirement. After that initial 3k purchase you can now buy in some more in easy $100 bits without fees.

So, for most early investors I recommend saving up 3k, buying a broad fund, and then adding to it as you can. I find it a lot easier to save money mentally by simpling dumping a hundred bucks in every few days or weeks or whatever versus trying to save up enough to justify the broker fee on an ETF and ending up spending it on something as you wait.

By: Craig

Craig — Mon, 22 Dec 2008 18:17:45 +0000

Good article. for someone who is unfamiliar with both types of funds, this was a good basic breakdown of them and their pros and cons. I really enjoyed how you did that. Thanks.

By: Rich

Rich — Mon, 22 Dec 2008 18:04:02 +0000

Very good article. I think one thing to mention on pricing is that an institution will generally stand ready to correct prices in an ETF (Barclays for example, when talking about iShares ETFs), thereby making them even more efficient.

By: Jacqui

Jacqui — Mon, 22 Dec 2008 05:04:19 +0000

I was researching funds for starting up my Solo 401(k). The ETF’s had one really good thing going for them: lower expense ratios. Depending which mutual fund I’m looking, the ETFs also have lower transaction fees ($9.99 on E*TRADE vs. $19.99 for regular mutual funds – but $0 for no fee mutual funds). I ended up going with mutual funds for one big reason though – E*TRADE won’t let me ‘DRIP’ an ETF. I’m not sure any brokerage will. Lack of dividend reinvestment is a deal-breaker for me. I’m also getting mostly no fee funds so that I have the option to dollar cost average years I don’t have the whole amount on hand at the beginning of the year. I prefer to invest annually, but if that’s not possible, I don’t want to be shelling out $9.99 per transaction.

Of course, if I only had an IRA or taxable account to work with, I would absolutely go for ETFs in an account with Zecco so I could make the trades for free!

By: AndyA

AndyA — Mon, 22 Dec 2008 03:54:04 +0000

When I initially learned about ETFs, I liked the idea and thought it would be a great way to invest. I’ve since backed off, slightly. My understanding is that if I have a lump sum, say $10K (why is that always the magic number that is used to show growth…why not $1K or $100K) to invest, then a ETF would probably be the way to go. But, if I’m only doing $100/month, dollar cost averaging, then Index funds are better, mainly because of the brokerage fees associated with ETFs. I usually don’t invest lump sums, so I use the index funds. I’d love to hear other ideas.