Author Topic: ETFs vs. Index Funds  (Read 5508 times)

tannybrown

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ETFs vs. Index Funds
« on: April 04, 2012, 09:45:46 AM »
I've been doing some very light research on ETFs vs. Index funds for my Roth (w/Fidelity).  I'm leaning towards ETFs -- the only downside is that I need to buy at least one share at a time (so I wouldn't always be able to invest, say, $100 even?...may need clarification here).

Any opinions out there on one vs. the other?

TLV

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Re: ETFs vs. Index Funds
« Reply #1 on: April 04, 2012, 11:05:43 AM »
From what I've seen (at Vanguard), the ETFs generally seem to be better - lower expense ratios, and no penalties for selling. For example, VTI (vanguard total stock market etf) has expense ratio of .07%, while the index fund equivalent has a ratio of .18% if you have less than $10k in it. Also, if you sell from the fund, you can't add to it again for 3 months; the ETF doesn't have that restriction. Both the ETF and the fund are no-load if you get them with a vanguard account.
 **That's important - whichever you choose, make sure there's no extra fee to buy or sell - that typically means buying Fidelity funds/etfs if your account is at fidelity.

You're probably right about having to buy whole shares at a time - if you want to dollar-cost-average with an automatic investment each month, the funds may be better for you, but you'll want to doube check and see what Fidelity allows.

For me, I would prefer using ETFs, but I'm stuck with the regular funds for now - Vanguard won't let me create a brokerage account because my employer is a publicly-traded company.

gestalt162

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Re: ETFs vs. Index Funds
« Reply #2 on: April 09, 2012, 01:16:59 PM »
One big issue with Mutual Funds is that they may require a large minimum initial investment $2-5K. It was for this reason that I went with ETFs.

You can always try trading less frequently- put in cash every month (or week, or biweek), and trade quarterly.  This will still allow you to buy low and sell high to some extent and buy full shares while being able to set aside money every month.

orangeclocker

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Re: ETFs vs. Index Funds
« Reply #3 on: April 30, 2012, 11:50:42 AM »