[ 3 / biz / cgl / ck / diy / fa / ic / jp / lit / sci / vr / vt ] [ index / top / reports ] [ become a patron ] [ status ]
2023-11: Warosu is now out of extended maintenance.

/biz/ - Business & Finance

View post   
File: 1.21 MB, 1536x1024, average american.jpg [View same] [iqdb] [saucenao] [google]
702916 No.702916 [Reply] [Original]

What's better for a long term, buy and hold investment:

ETFs or Index Funds?

>> No.702917

The most popular ETFs track the various indices. Your question is all retarded.

>> No.702922
File: 14 KB, 387x429, that love feel.png [View same] [iqdb] [saucenao] [google]
702922

>>702917

On Vanguard I have the option to invest in ETFs or Index Funds. How am I retarded for asking which is better for a long term investment?

I also read a couple of articles and there are clear differences (cost of trading, commission, availability).

I'm here for a second opinion, if you can't give a good one, kindly leave the thread.

>> No.702930

>>702922
You are retarded because vanguard offers both mutual funds and ETFs that track various indices.

What do you think an index fund is? Just a mutual fund that tracks the index?

Mutual funds and ETFs are similar, only ETFs allows the shares of ownership in a fund to be traded on a stock exchange. These are called closed funds because no new money is admitted, the shares of the fund are just traded on the market.

Mutual funds are usually open-ended funds, meaning you can add more capital to the fund. So when you add $3,000 into your Vanguard S&P 500 index fund that's just $3,000 more dollars that they manage, and you can't trade your stake, only withdraw your earnings and principal.

Now, do some fucking Googling you moron. I'm being nice, but if you actually want to learn jack shit about finance or the stock market you're gonna need to read.

>> No.702931

>>702922
You probably mean MUTUAL funds, not index funds. But of course, both ETFs and mutual funds can track indexes and thus serve as index funds.

There's usually a .01% expense ratio difference between vanguards ETFs (~0.18%) and mutual (~0.17%) funds that track the same things. I personally like the price transparency w/ ETFs, but others prefer mutual funds because of that .01% difference (which is $1/year on $10,000).

>> No.702950

If they have the same underlying holdings there's going to be practically no difference at all in the long term. Go with whatever has the lowest MER, which is probably the ETF.

>> No.702951

>>702930

I have actually researched this and your posts didn't tell me anything I didn't already know. In fact, it's missing crucial factors to take into account, like tax and commission fees.

>You are retarded because vanguard offers both mutual funds and ETFs that track various indices.

Well done. They have both an index fund and an ETF for, for example, the FTSE 100. But there are differences between the two investment vehicles, which is what I'm here to talk about.

>> No.702954

ETF = exchange traded fund. An ETF that tracks an index would be an index fund.

There are also mutual funds that track an index. These would also be index funds.

>> No.702958

>>702931
>>702954

Yes they call mutual funds that track an index, 'index funds'.

>> No.702962

>>702958
They're both called index funds.

>> No.702963

>>702958
and they call ETFs that track an index, 'index funds'.

You're were wrong in the OP, just deal with it faggot.

>> No.702971

>>702962
>>702963

The way I described them is how they are used today. You may be correct, but only technically correct, the worst kind of "correct".

http://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp

http://investorplace.com/2014/09/vanguard-index-funds-vs-etfs/

http://www.forbes.com/sites/mitchelltuchman/2013/11/01/index-fund-vs-etfs-get-the-facts/

>> No.702974

>>702971

technically correct is the BEST kind of correct

>> No.702976

>>702974

If you're autistic.

>> No.702992

>>702976
I bet you're a liberal.

>> No.702997

>>702992

Classical liberal aka libertarian. So no.

>> No.702998

>>702997
>Classical liberal aka libertarian
Explains a lot.

>> No.703004

OP, I'm sorry that you ran into this level of autism in response to your very simple and very relevant question.

For a long-term investing strategy, choosing between ETFs and traditional index funds typically comes down to two important considerations: (a) fees, and (b) trading costs.

Since you said above that you're planning to invest in-house at Vanguard (>>702922), trading costs are the same between the two options. As you probably already know, Vanguard offers commission-free trading on its own ETFs. At the same time, Vanguard does not charge loads on its index funds. So there are no trading fees either way.

As for fees, the deciding factor will be whether you qualify for Admiral class shares or not ($10,000 and up for index funds). If yes, then you'll have the same fees as the equivalent ETF. If not, then your traditional fund will have a slightly higher fee. This is often the key factor between the two for new investors with small starting accounts.

A couple final points:

1. Vanguard charges a $20 annual account service fee for all brokerage accounts unless you are Voyager or above ($50,000 total assets). For traditional funds, the $20 account fee is charged only if your aggregate fund balances are less than $10,000. So its easier to avoid the annual fee with traditional funds.

2. A brokerage account (ETFs) is more flexible going forward because you can buy any exchange-traded security. You can also provision your brokerage account with margin and options trading, if you choose.

3. A traditional fund account is better for automatic periodic investments, such as fixed monthly withdrawals from your savings account. Some people like to add to their investment accounts automatically on a regular basis, and this requires a traditional fund account.

Good luck with your account.

>> No.703021

>>703004

Thank you iHaz I appreciate your help. Would you vouch for Vanguard or is there a better service for online self-investing?

>> No.703035

>>703021
I think there is none better than Vanguard. Schwab and Fidelity are pretty competitive on index fund fees, but Vanguard is the only investor-owed mutual fund company out there.

When Schwab & Fidelity make profits (and they do), it benefits their owners. When Vanguard makes profits, it benefits its investors (i.e., you and me).

https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

>> No.703196
File: 35 KB, 700x700, 1423794526851.png [View same] [iqdb] [saucenao] [google]
703196

>>702971

>> No.703319

>>703035
Fuck off iHaz

>> No.703330

>>703004
>1. Vanguard charges a $20 annual account service fee for all brokerage accounts unless you are Voyager or above ($50,000 total assets). For traditional funds, the $20 account fee is charged only if your aggregate fund balances are less than $10,000. So its easier to avoid the annual fee with traditional funds.

This is waived if you select paperless statements.

>> No.703406

>>702916
>all those guns
>all those pills

Oh, America

>> No.703412

>>702922

Ignore that guy he is a retard who ignores the fat that ETF's = Traded funds i.e returns depend on who buys the actual etf.

ETF returns are based on the same principle as a stock. It tracks an index but if nobody wants to buy it its going nowhere just like a stock.

>> No.703417
File: 123 KB, 1067x653, 1426977526894.jpg [View same] [iqdb] [saucenao] [google]
703417

>mfw people still try to buy and hold, you aren't Warren Buffett

>> No.703425

>>703406
>all those guns
>6 guns
really, faggot?

>> No.703437

>>703406
>6 guns
That's not shit amigo.

>> No.703461

>>703417
whats your strategy, newb?

>> No.703494

Would it be wise to buy up a diversity of ETFs to the point where monthly dividend payouts are about the same as your cost of living and just live off of that? Or are there greater risks involved that keeps people from doing that?

>> No.703497

>>703461
Buy low, sell high :^), get your own system piker.

>> No.703503

>>703497


>doesn't even have an investment account

get off my /biz/

>> No.703919

>>702916

Is the movie on screen 44 minutes? If so I kek'd.

>> No.703929

>>703919
it's heat. how the fuck do you not recognize it?

>> No.703960

Sigh

There is no such thing as a literal index fund. The term is used in place of its proper term, ETF (a fund that tracks an index) because it allows ETF marketers to make the famous active vs passive comparisons. Here's how a mutual fund stacks up to the S&P 500....

Of course this is stupid. No one can invest in the S&P 500. It's a list of stocks, not a fund. You have yo buy an ETF that tracks the S&P. But unlike the index, the ETF pays taxes and charges fees. So even the ETF underperforms the S&P.

And of course the S&P is an actively selected list of 500 stocks based on an algorithmic criteria so it's automated active trading, not "passive". You can buy and hold the S&P etf but the S&P changes so you're not "holding". It's just a slow algo trading program.

It's borderline scammy and bogle and friends have made a fortune on dumb consumers but hey, whatever.

Source: worked at a ETF provider starting with vanguar

>> No.703965

>>703960
So what does one do without insider knowledge, vast stock knowledge & network or time? Something that isn't real estate and yet throws profits simply for waiting.

Maybe I'll have to direct invest in local startups...

>> No.703975

half of my ETFs were domestic.

Now I'm disappointed.

>> No.703984

>>703035
fuck off iHaz

>> No.703988

>>703960
This is shit-tier bait. Of course there is such thing as a literal index fund. Traditional mutual funds existed for decades before ETFs started trading in 1993. Index funds (literal index funds) have existed since 1976, the first being Vanguard's S&P 500 Index Fund (VFINX).

Does a fund track an index perfectly? No. Does that detract from their successful deployment in a fully-diversified, low-cost fund strategy? No. You aren't telling anyone anything they don't already know.

>But unlike the index, the ETF pays taxes
Huh? ETFs and traditional funds are regulated investment companies, and under IRS regulations do not pay taxes. For tax purposes, they are pass-through entities assuming they follow the regulations (which they all do).

>It's borderline scammy
Ok, thanks for the insight Mr. Tinfoil Hat.

>worked at a ETF provider starting with vanguar
Janitor? Mail room? Because you clearly have little idea what your talking about.

>> No.704009

>>703988
Fuck off iHaz you jew queerbait

>> No.704699

>>703425
>>703437
I count 7.

It's also 6 more guns than most people have...