- Index funds provide the best combination of diversification and performance (Why Indexing Wins).
- Exchange-traded funds are the cheapest and most convenient way for individuals to build and manage a portfolio of index funds, as long as the transaction fees to buy and sell the ETFs represent a small percentage of the amounts you are investing (The 7 Advantages of ETFs Over Index Mutual Funds).
- A (model) portfolio of index ETFs has annual expenses roughly 18% less than a similar portfolio of Vanguard index mutual funds (ETF Investing Guide: ETFs Are Cheaper Than Index Mutual Funds).
- ETFs are more tax efficient than index mutual funds, and easier to manage for tax-loss selling (The 7 Advantages of ETFs Over Index Mutual Funds).
- Asset allocation and portfolio rebalancing are easier with ETFs than with index mutual funds (The 7 Advantages of ETFs Over Index Mutual Funds).
- ETFs are particularly attractive in combination with ultra-low cost online trading (The Single (But Serious) Disadvantage of ETFs).
- ETFs don't make sense if you want to invest small amounts regularly (The Single (But Serious) Disadvantage of ETFs). In that case, the cost of buying the ETFs - even in an online brokerage account - outweigh the advantages of ETFs compared to index mutual funds.
ETF Investing Guide: Summary: A Better Approach
Jul 1 2006, 07:02
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