Poll

Which is better

Mutual Funds
11 (61.1%)
ETF
7 (38.9%)

Total Members Voted: 15

Author Topic: Investing  (Read 2531 times)

Travisthetruth

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Investing
« on: September 10, 2014, 09:19:53 AM »
I'm talking about investments with my friend. Which one is better, mutual funds or ETF's. If you think it's not one that's stated above then feel free to say what you think it is.

Scandium

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Re: Investing
« Reply #1 on: September 10, 2014, 10:37:39 AM »
Wrong forum?

And what do you mean by better?

Lkxe

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Re: Investing
« Reply #2 on: September 10, 2014, 10:49:01 AM »
Travis, At Vanguard the only difference between the ETF and the fund is the expense. And Admiral shares have the same expenses as the ETFs. At you age and income level, ETFs will get you in the market sooner- you won't have to wait to gather the fund minimum. PS I saw your post on Mustachian problems, you will age but then people won't listen to you because you're weird. Ignore them.

Travisthetruth

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Re: Investing
« Reply #3 on: September 11, 2014, 09:59:00 AM »
Wrong forum?

And what do you mean by better?

I'm already $500 in Mutual funds with 50% of my paycheck going into it every month but i was wondering if i should be in something else

johnny847

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Re: Investing
« Reply #4 on: September 11, 2014, 10:30:11 AM »
Wrong forum?

And what do you mean by better?

I'm already $500 in Mutual funds with 50% of my paycheck going into it every month but i was wondering if i should be in something else

Based on the context provided, I think you're asking the wrong question. It shouldn't be a question of mutual funds vs ETFs. It should be a question of what kind of investments do you want to buy. Stocks? Bonds? Is the fund or ETF well diversified? Is it indexed or actively managed (statistically, the better answer is indexed)?

Both ETFs and mutual funds can be invested in the same assets. For example, virtually every mutual fund that Vanguard offers has an ETF version.

Now granted, ETFs and mutual funds can have different expense ratios, as Lkxe pointed out. But ETFs in general can't be automatically invested (technically, it could work if they automatically invested using market orders. However, market orders are susceptible to skulldudgery and should be avoided when possible). Also, there is a usually small bid/ask spread that will reduce your overall return by a small amount. Hence I say that once you've gotten a clear plan for what kind of assets you want to own (bonds, stocks, international vs domestic, etc) mutual funds are superior. But I emphasize that based solely on the context that you provided, it is the wrong question to be asking at this time.

Scandium

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Re: Investing
« Reply #5 on: September 11, 2014, 11:19:36 AM »
Wrong forum?

And what do you mean by better?

I'm already $500 in Mutual funds with 50% of my paycheck going into it every month but i was wondering if i should be in something else

Mutual funds allow easy automatic investments, you can put in/take out a dollar amount without worrying about whole shares. (I find that to be a bit of a hassle)
ETF (often) have lower fees. With Vanguards fees this is not really worth worrying about
ETF are (again; usually) slightly more tax efficient as fewer taxable gains are realized.
ETFs can be traded intr-day. But I don't really see that as a plus..

All these are minor points. I wouldn't say one is much better than the other. I would stick to a simple mutual fund if I were you (low cost, index of course). You have little or nothing to gain from using ETFs.

johnny847

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Re: Investing
« Reply #6 on: September 11, 2014, 11:25:10 AM »
Wrong forum?

And what do you mean by better?

I'm already $500 in Mutual funds with 50% of my paycheck going into it every month but i was wondering if i should be in something else
ETF are (again; usually) slightly more tax efficient as fewer taxable gains are realized.

As you say, usually true. In the case of Vanguard, it is not, as they funnel capital gains in their mutual funds into the ETFs, which don't incur any capital gains until they are sold.