July 07, 2012 - Same Index Fund Different Returns on Equity - by Morningstar Investment Research
I've been shopping around for index funds and noticed that mutual funds and exchange-traded funds that track the same index often have different returns. Why is this?
Morningstar assistant site editor Adam Zoll recently addressed this question, mentioning that indexing has become an increasingly popular investment strategy, with about $55 billion in new assets added to index mutual funds (not including ETFs) during each of the last three years, according to the Investment Company Institute. The popularity of indexing has helped spur the growing interest in exchange-traded funds, the majority of which track indexes. But, as the reader noted, not all index funds and ETFs are created equal. In fact, there are a few different factors that cause some funds or ETFs to track their indexes more closely than others.
Don't Sabotage Your Retirement to Pay for College
Given the flagging job prospects for new college grads, as well as the soaring higher-education costs, it's only natural that families are paying attention to the payoff potential of various schools and degrees. But by multitasking as so many parents do--saving for college and their own retirement at the same time--they run the risk of coming up light on the retirement front with no way to make up for the shortfall, except for working longer. The old saying about this topic is dead-on: Your child can get a loan to pay for his or her college education, but no one will give you a loan to pay for retirement if it turns out you haven't saved enough. Given increasing rates of longevity, rising health-care costs, and what many expect will be only so-so returns from the stock and bond markets in the decades ahead, Morningstar director of personal finance Christine Benz asked can anyone ever really be sure they'll have enough money on which to reti re?
Among the other topics we addressed this week:
A Midyear Portfolio Checkup in 6 Steps Here are a handful of tips for allocators, bargain-hunters, and the tax-averse for the second half of the year.
Funds That Aren't Afraid to Show Their Independence These managers play by their own rules in their quest to outperform the market.
How J.P. Morgan's 'Whale' Loss Got Bigger The ballooning of J.P. Morgan's loss estimates has more to do with decisions than derivatives.
Dividend Income Versus Dividend Growth While the higher yields from high payout ratio stocks are enticing, stocks that offer dividend growth are generally higher quality.
Burned by the Last Bear Market? Consider This ETF This fund doesn't tolerate large losses.
A Matter of Disclosure The SEC has finally weighed in on one of the financial crisis' biggest blunders, which occurred at this fund firm.
Oppenheimer, Goldman Sachs Exit Target-Date Industry Plus Calamos hires value team, Franklin adds managers, and more.
This Fund's Discount May Narrow as Cost of Leverage Is Set to Decrease Neuberger Berman Real Estate Securities Income looks interesting at this level, especially given the recent expiration of a very expensive interest-rate hedge.
T. Rowe Price's 20-Year Club For these managers, the long run truly means the long run.
9 of the Biggest Manager Changes So Far in 2012 Evaluating key changes at Fidelity, Third Avenue, and Legg Mason.
Netflix Still Not Getting It Right Not only does the firm face headwinds in the United States, but we view its push for international expansion as a long-term money loser.
Tips for Selecting a Financial Advisor You Can Trust Readers weigh in on avoiding brokerage commissions and understanding investment philosophy when in the hun t for a financial planner.
The Housing Market Picks Up Steam The trickle of good housing news has turned into a flood.
Wipro: An Overlooked Offshore Player This IT firm's strong momentum isn't reflected at current valuation levels.