Need opinions-ETF's vs Mutual funds?

MDT · Apr 15, 2008

So, I finally have a decent income and I am starting out investing.
I have paid off high interest dept. (credit cards) and I have 3-4 months salary in a decent money market fund for emergencies. I currently plan on having the core of my investments being index mutual funds. My question is this;
Should I use exchange traded funds (ETF's) instead of index mutual funds? I know that there are some tax advantages to ETF's, but are they worth it?
Does anybody out there use ETF's for their core investments?

gogotren · Apr 25, 2008

If you just want index exposure say like the sp500 then def. just buy the spiders or diamonds etf. MF will be the same thing with more fees. I actually prefer an equity indexed annuity for index exposure because it gets you tax deferred, principal protection... ETF`s are generally a bit more narrow in range than a mf. It may only have 20-30 stocks in it compared to 80-200 in a mf for stuff like international. One big plus of ETF`s is they are liquid and get you exposure to direct sectors you want, like energy services or energy equipment. I`m a financial advisor so if you have any more questions just shoot me a pm.

RipDseL · May 17, 2008

there are many pros and cons to each depending on your individual situation, age, goals, etc. Currently my portfolio consists of 30% passively managed funds (ETFs) and 70% Actively managed (Mutual Funds). ETFs are good for tax efficiency, but i'd say I'm more of a fan of focused Mutual funds or funds with small concentrations 25 or so stock holdings. I use ETFs in my portfolio to track the indexes VTI for the S&P 500, EFA for the EAFE index, IWR for mid caps, VB for small caps, EPP for asia exposure. Another advantage of ETFs is a lower minimum where you may have to invest a minimum of $2500 in some funds.

Do your research but keep in mind fund management fees and commision fees charged on a per transaction basis. I know my brokerage charges me $12.50 per transaction on ETFs. I generally only invest in NTF Mutual Funds.

And just for reference I am a Financial Analyst.

c3r3br0 · Jun 16, 2008

Not sure your goals.

Are you investing for retirement? If so, the minimums are alot smaller for an IRA and you have a huge range of index funds to choose from. You still have to watch the market though, but not as frequently.

I move money between 3 separate indexes depending on the world economy.

muslhead · Jun 27, 2008

in most cases where everything else is equal, your best bet is an etf vs a mutual fund. The only reason is that the expense ratios are usually less.

The key to my statement is where everything else is equal. For example if you wanted to buy into the SP500, the etf equivalent will have a lower expense ratio. There are advantages and disadvantages to each (intra day trading vs end of day, stop loss capabilities, no transaction fees, etc) so you will need to look at what is important to you.

MH