Do you prefer etfs or mutual funds?

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glennherwig
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Do you prefer etfs or mutual funds?

Post by glennherwig » Thu Nov 08, 2018 5:23 pm

This is my first thread! Glad I joined this community of smart and savvy investors. I’m very fortunate for everyone’s input on a day to day basis.

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient. I know Bogle prefers to use mutual funds so you don’t trade in and out.

My Thesis is simple. I want fast convenient and liquid investments. I don’t want to watch the paint dry when I sell an investment. Such as a mutual fund (having to submit order before market close) I like the flexibility etfs give me.

I only own one mutual fund and that’s the JP Morgan 2055 target date fund. That’s through my employer 401k. The rest of my investments are etfs. I’ve contemplated owning the TRBCX mutual fund but that’s about it.

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?

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Re: Do you prefer etfs or mutual funds?

Post by brad.clarkston » Thu Nov 08, 2018 5:35 pm

There both just tools to use I don't prefer one over the other. CEF's is the only thing that gives me heartache so I don't use them.

I have a Core 4+1 port in my Fidelity IRA so my two tilts are ETF's but the core 3 are funds.
My Vanguard is the standard 3 fund port so not ETF's.
My 401k is a Target Date 2045 (I think of them as a equity/bond slider if I want more bonds I'd just pick a closer date).

My tip? Don't over think it and don't make it complex until late 30's early 40's just sock money into it. A Target Date fund is perfect for that.

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Re: Do you prefer etfs or mutual funds?

Post by motorcyclesarecool » Thu Nov 08, 2018 5:49 pm

I feel that ETFs have less flexibility in purchasing and selling. I am limited to during business hours and I have to babysit to avoid being hosed on the bid-ask spread. With mutual funds, I can place my order any time and be assured of my execution at a fair price.
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Re: Do you prefer etfs or mutual funds?

Post by harvestbook » Thu Nov 08, 2018 6:01 pm

I remember when I was young and in a hurry!
I'm not smart enough to know, and I can't afford to guess.

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Re: Do you prefer etfs or mutual funds?

Post by bluquark » Thu Nov 08, 2018 6:15 pm

I've used a mix of both for a few years and I've come to prefer mutual funds. You can buy exact amounts by dollar and you can place exchanges outside of market hours without waiting for the funds to show up in your settlement account before placing the "buy". The 30-day cool-off period in some of the funds was annoying at first, but I eventually realized it protects me from accidental wash sales during tax-loss harvesting. So there's less thought and time needed to rebalance mutual funds.

Meanwhile, from my POV the main advantage of ETFs is you can easily transfer them to another broker if you eventually want to. But you can ask Vanguard to convert your mutual fund shares to ETF shares with no tax consequences, so that optionality is present in mutual funds anyway.

All things considered, the difference is really not a big deal though. It's just a minor question of convenience.
Last edited by bluquark on Thu Nov 08, 2018 6:21 pm, edited 3 times in total.

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Re: Do you prefer etfs or mutual funds?

Post by KyleAAA » Thu Nov 08, 2018 6:17 pm

Mutual funds. But I own plenty of ETFs.

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Re: Do you prefer etfs or mutual funds?

Post by WhiteMaxima » Thu Nov 08, 2018 6:23 pm

vanguard passive indexed mutual fund admiral class and institutional class

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Re: Do you prefer etfs or mutual funds?

Post by Longdog » Thu Nov 08, 2018 6:29 pm

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
This is my first thread!

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient.
I encourage you to do more research. ETFs are no more or less liquid or tax efficient than index mutual funds.

My Thesis is simple. I want fast convenient and liquid investments. I don’t want to watch the paint dry when I sell an investment. Such as a mutual fund (having to submit order before market close) I like the flexibility etfs give me.
Your attitude does not seem consistent with the Bogleheads way of thinking, which is slow and steady and disciplined. In other words, boring. Paint drying boring. Grass growing boring. You likely will not get the feedback you expect from this forum. If you want to grow your net worth, I encourage you to take to heart the recommendations you receive here. Seek excitement in something other than investing.

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?
Index mutual funds are not very different from ETFs. In fact, in many cases, they are merely different share classes of the same investments. I own both ETFs and mutual funds. I prefer mutual funds because they are slightly more convenient to buy or sell - you don’t have to set a price or pick an instant to sell - you simply get the closing price for the day. Over time, it won’t matter much, one way or the other.
Steve

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Re: Do you prefer etfs or mutual funds?

Post by triceratop » Thu Nov 08, 2018 6:32 pm

Any reason why index mutual funds are better than etfs?
Index ETFs are Index Mutual Funds. The anti-ETFers had to coin an entirely new name -- "TIFs" -- so that they could contrast their beloved products with ETFs.

I started out with daily-liquidity mutual funds when I was 22 (so, it's not just old geezers who buy "boring" non-exchange-traded mutual funds). I switched to ETFs at some point, but it wasn't because I became a huge believer in ETFs for whatever reason. They were mildly more convenient for certain things I wanted to do. That's all.

What do I prefer today? I buy ETFs but I'm pretty agnostic that there is any real difference. Certain ETFs are mildly more tax efficient but I don't think it makes a big deal, or anything.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Do you prefer etfs or mutual funds?

Post by sport » Thu Nov 08, 2018 6:48 pm

I greatly prefer traditional mutual funds. I believe they are simpler to purchase and sell. There are no complications such as spreads, limit orders, market orders, etc. You can purchase or sell any exact amount and the transaction occurs at the end of the day. There is no concern about whole shares, the number of mutual fund shares are calculated to three decimal places. The only advantage I can see to ETFs is if you want to hold Vanguard funds at some other broker, non-Vanguard funds at Vanguard, or if you cannot handle the 3K minimum purchase amount. None of these situations apply to me.

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Re: Do you prefer etfs or mutual funds?

Post by Peculiar_Investor » Thu Nov 08, 2018 6:51 pm

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
Any reason why index mutual funds are better than etfs?
There are pros/cons to each. If you haven't already found it, the wiki has an article on the subject -- ETFs vs mutual funds.
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Re: Do you prefer etfs or mutual funds?

Post by tindel » Thu Nov 08, 2018 6:59 pm

I prefer mutual funds. Mostly because I can schedule to buy anytime. I work during trading hours. This way I can place orders in the evenings and weekends.

I do this even in taxable accounts. The math I've done shows that I'll spend maybe a few hundred extra bucks on the Mutual funds each year after everything is considered (taxes, STCG, LTCG, ER, etc). It's not worth the headache of trading during normal business hours.

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Re: Do you prefer etfs or mutual funds?

Post by AlexisAtEasternState » Thu Nov 08, 2018 7:04 pm

I prefer ETFs in taxable accounts because they are simply more tax efficient. WIth mutual funds you pay capital gains each year. Well managed ETFs don't distribute capital gains and your heirs receive a stepped up basis when you pass. Your family never pays taxes on investment gains. :sharebeer

I prefer mutual funds in tax advantaged accounts because there is no 2 day delay in reinvesting dividends.

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Re: Do you prefer etfs or mutual funds?

Post by Captain kangaroo » Thu Nov 08, 2018 7:06 pm

ETF's because I can move them around brokerages easier and they're more tax efficient.

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Re: Do you prefer etfs or mutual funds?

Post by whodidntante » Thu Nov 08, 2018 7:24 pm

Captain kangaroo wrote:
Thu Nov 08, 2018 7:06 pm
ETF's because I can move them around brokerages easier and they're more tax efficient.
+1. Pretty sure I am running a negative ER overall.

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Re: Do you prefer etfs or mutual funds?

Post by wolf359 » Thu Nov 08, 2018 7:43 pm

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
This is my first thread! Glad I joined this community of smart and savvy investors. I’m very fortunate for everyone’s input on a day to day basis.

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient. I know Bogle prefers to use mutual funds so you don’t trade in and out.

My Thesis is simple. I want fast convenient and liquid investments. I don’t want to watch the paint dry when I sell an investment. Such as a mutual fund (having to submit order before market close) I like the flexibility etfs give me.

I only own one mutual fund and that’s the JP Morgan 2055 target date fund. That’s through my employer 401k. The rest of my investments are etfs. I’ve contemplated owning the TRBCX mutual fund but that’s about it.

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?
1. If you're buying and selling your ETFs every day, you're doing it wrong. Is your goal to day-trade, or to invest for the long term. The last time I checked, 2055 (your target date) is still years away. So why is it important to have an investment vehicle that you can day trade? (Hint: It's not.)

2. One of the most powerful tools you have is automation. Having your investments automatically get withdrawn and invested without you having to do anything means that you save with every paycheck, and you are less likely to mess it up. Automation is a tool for long-term investors. Mutual funds are geared to automatic investments; ETFs outside of a 401-k require you to actually make your purchasing decision every time.

3. Buying mutual funds lets me invest every penny. If I'm using ETFs, I have to buy whole shares. I always have a little money left over sitting in the cash account.

4. I have to worry about a spread when buying or selling ETFs. With mutual funds, I just place the order.

5. I can always convert the Vanguard mutual funds to Vanguard ETFs if I have to. I can't go the other way.

Vanguard mutual funds have the same liquidity and tax efficiency as Vanguard ETFs. I can sell them easily and convert them to cash in my bank account at the same speed. Vanguard has a patent that allows their mutual funds to enjoy the same tax efficiency as the ETFs.
WIth mutual funds you pay capital gains each year. Well managed ETFs don't distribute capital gains and your heirs receive a stepped up basis when you pass. Your family never pays taxes on investment gains.
This is not true for Vanguard index funds. It is primarily true for actively traded mutual funds. Vanguard index funds are very tax efficient, and only generate dividends (same as the ETFs.)

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Re: Do you prefer etfs or mutual funds?

Post by arf30 » Thu Nov 08, 2018 7:46 pm

Mutual funds, but I'll switch if anyone ever rolls out automatic investing for ETFs.

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Re: Do you prefer etfs or mutual funds?

Post by mary1969 » Thu Nov 08, 2018 8:02 pm

to trade, etf's. to invest, mutual funds.

one thing i do do with etf's is use GTC orders. Specifically bids below the mkt in vti and vxus. during the financial crisis i had GTC bids in the mkt and it helped big time.

since 2009 i can't think of one 10% correction that i have not bought the mkt with GTC orders. When corrections occur you buy. It aint easy....but your first reaction is to cancel the orders. i was a scale down buyer this month below 137 in VTI and below 51 in VXUS.

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Re: Do you prefer etfs or mutual funds?

Post by vineviz » Thu Nov 08, 2018 8:06 pm

I greatly prefer ETFs. The are a tax-efficient, portable, modern version of the old-fashioned mutual fund.
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Re: Do you prefer etfs or mutual funds?

Post by Karamatsu » Fri Nov 09, 2018 3:21 am

I don't have a choice because of residency rules, but if I could use either one, I'd compare the costs. I'm not sure about now, but for a while, at least, Vanguard's mutual funds had higher fees than the ETF share class of exactly the same fund. The ETF might trade at a premium or a discount to the NAV, so you'd have to take that into account, but if you're buying and holding, that's a one-time cost compared to higher fees deducted annually. At some point the expenses would offset the ETF trading spread, though you'd have to calculate where that breakeven point is.

As it is, I use ETFs for everything and the only problem is that I have to choose my buy/sell prices rather than just taking the NAV at the end of any given day. But I only buy/sell shares to rebalance, so that's usually just once or twice a year unless there's a lot of volatility. The one thing that traditional mutual funds do offer, I think, is the ability to set up some kind of regular investment plan that you can essentially just set and forget. Some of the "robo-services" probably allow the same thing with ETFs, though. Not sure.

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Re: Do you prefer etfs or mutual funds?

Post by GRP » Fri Nov 09, 2018 4:13 am

Definitely prefer ETFs personally. All other things being equal they tend to be lower cost, at least in my country.

Of course they have a downside of making it tempting to trade, but that's not something I've ever had an issue with so it's kind of moot.

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Re: Do you prefer etfs or mutual funds?

Post by randomizer » Fri Nov 09, 2018 7:03 am

Mutual funds by far.
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Re: Do you prefer etfs or mutual funds?

Post by White Coat Investor » Fri Nov 09, 2018 8:05 am

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
This is my first thread! Glad I joined this community of smart and savvy investors. I’m very fortunate for everyone’s input on a day to day basis.

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient. I know Bogle prefers to use mutual funds so you don’t trade in and out.

My Thesis is simple. I want fast convenient and liquid investments. I don’t want to watch the paint dry when I sell an investment. Such as a mutual fund (having to submit order before market close) I like the flexibility etfs give me.

I only own one mutual fund and that’s the JP Morgan 2055 target date fund. That’s through my employer 401k. The rest of my investments are etfs. I’ve contemplated owning the TRBCX mutual fund but that’s about it.

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?
I prefer funds. Trading once a day is all the liquidity I need and keeps things simple.

Nothing wrong with your choice, by the way. I've used them too when using them is significantly cheaper.
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Re: Do you prefer etfs or mutual funds?

Post by leeks » Fri Nov 09, 2018 8:34 am

Mutual funds

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Re: Do you prefer etfs or mutual funds?

Post by Silence Dogood » Fri Nov 09, 2018 8:38 am

I prefer mutual funds.

I like being able to purchase fractional shares and I like being able to set up automatic investments.

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Re: Do you prefer etfs or mutual funds?

Post by stan1 » Fri Nov 09, 2018 8:44 am

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?
In a taxable account only ETFs so you can move to another brokerage. You are 21 and hopefully have another 80 or more years of investing ahead of you. The world will be a different place so give yourself flexibility. There are also better tax loss harvest pairs with ETFs.

Everything else is personal preference at this point. There are may ways you can get free trades even with small accounts. In a tax advantaged account it doesn't matter because you can shift from one to the other whenever you want without tax penalty.

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Re: Do you prefer etfs or mutual funds?

Post by chrisjul » Fri Nov 09, 2018 3:26 pm

harvestbook wrote:
Thu Nov 08, 2018 6:01 pm
I remember when I was young and in a hurry!

LOL... +1

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Re: Do you prefer etfs or mutual funds?

Post by ruralavalon » Fri Nov 09, 2018 3:45 pm

Welcome to the forum :) .

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
This is my first thread! Glad I joined this community of smart and savvy investors. I’m very fortunate for everyone’s input on a day to day basis.

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient. I know Bogle prefers to use mutual funds so you don’t trade in and out.

My Thesis is simple. I want fast convenient and liquid investments. I don’t want to watch the paint dry when I sell an investment. Such as a mutual fund (having to submit order before market close) I like the flexibility etfs give me.

I only own one mutual fund and that’s the JP Morgan 2055 target date fund. That’s through my employer 401k. The rest of my investments are etfs. I’ve contemplated owning the TRBCX mutual fund but that’s about it.

I’m only 21 and have a long way to go. I know I don’t know everything. Any tips and pointers for the youngster? Any reason why index mutual funds are better than etfs?
My own personal preference is traditional mutual funds rather than ETFs (Exchange Traded Funds). I don't see any ETF advantage in speed, convenience or liquidity. I see traditional mutual funds as more convenient and just as liquid. I have no need for intra-day trading.

At Vanguard the ETF is just another share class of the mutual fund, so the mutual fund and ETF have the same tax-efficiency. Expense ratios for Investor Shares of Vanguard funds are low, the difference in expense ratio of ETFs is trivial (on a $3k investment, a 0.10% difference in expense ratio = just $3 per year). When you use Admiral Shares of funds at Vanguard, the expense ratio is just as low as the ETF.

In my opinion traditional mutual funds are easier to use and have simpler trading mechanics. With traditional mutual funds you can buy or sell fractional shares, you can easily set up automatic investment, and you can easily set up automatic reinvestment of dividends and gains. Wiki article, Wiki article, "ETFs vs Mutual Funds".

The choice of traditional mutual fund or ETF is largely a matter of personal preference.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Do you prefer etfs or mutual funds?

Post by mptfan » Fri Nov 09, 2018 4:14 pm

glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
My question... Do you prefer etfs or mutual funds?
I prefer mutual funds. I don't like that ETFs trade like stocks and you can buy and sell them in an instant because it makes it too easy and too tempting to trade them like stocks, and I don't like that they have a spread between the buy and sell price, and I don't like to pay a commission each time I buy or sell. I like that mutual funds trade once at the end of each trading day, and I can buy any amount and the exact amount of shares bought or sold are computed down to three figures after the decimal, and there are no commissions to buy and sell, and I like the option to automatically reinvest dividends.
Last edited by mptfan on Fri Nov 09, 2018 5:10 pm, edited 5 times in total.

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Re: Do you prefer etfs or mutual funds?

Post by Dead Man Walking » Fri Nov 09, 2018 4:26 pm

I prefer mutual funds because I dislike the hassle of the ETF purchasing process. However, ETFs may be a more viable alternative in some cases. For example, if one is interested in buying Vanguard US Multifactor fund, two options are available: the ETF VFMF and the mutual fund VFMFX, which is only available in admiral shares with a $50,000 minimum investment. Many investors may not have $50,000 to invest in a specialty fund or may be unwilling to invest $50,000 in a fund with such a brief history.

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Re: Do you prefer etfs or mutual funds?

Post by nedsaid » Fri Nov 09, 2018 6:05 pm

I invest in both though the bulk of my investments are in mutual funds. Recently, I did a rollover of a couple of workplace savings plans at Fidelity to a rollover IRA also at Fidelity. I purchased low cost ETFs for asset classes where I was dissatisfied with my mutual fund choices. I bought an iShares Small Cap Value ETF, a Wisdom Tree International Small Cap Dividend ETF, and an iShares International Bond ETF. I could buy iShares ETFs with no transaction fee, the Wisdom Tree product had a $4.95 trading fee. So not much difference for me between mutual funds and ETFs at Fidelity.

At other brokerages, you might have fees to buy ETFs.
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Re: Do you prefer etfs or mutual funds?

Post by ridebikeseveryday » Fri Nov 09, 2018 6:11 pm

arf30 wrote:
Thu Nov 08, 2018 7:46 pm
Mutual funds, but I'll switch if anyone ever rolls out automatic investing for ETFs.
https://www.m1finance.com/

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Re: Do you prefer etfs or mutual funds?

Post by mongoola » Fri Nov 09, 2018 9:12 pm

motorcyclesarecool wrote:
Thu Nov 08, 2018 5:49 pm
I feel that ETFs have less flexibility in purchasing and selling. I am limited to during business hours and I have to babysit to avoid being hosed on the bid-ask spread. With mutual funds, I can place my order any time and be assured of my execution at a fair price.
+1 for this.

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Re: Do you prefer etfs or mutual funds?

Post by LadyGeek » Sat Nov 10, 2018 9:51 am

This thread is now in the Investing - Theory, News & General forum (general discussion).
glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
I only own one mutual fund and that’s the JP Morgan 2055 target date fund. That’s through my employer 401k. The rest of my investments are etfs. I’ve contemplated owning the TRBCX mutual fund but that’s about it.
What you are missing is that your 401k contributions are by dollar, not by shares. ETFs don't trade in fractional shares, so your contributions can't be made as intended (the amounts will not be correct). Hence, mutual funds for 401k plans.

See the wiki: ETFs vs mutual funds - Bogleheads (Fractional shares)
ridebikeseveryday wrote:
Fri Nov 09, 2018 6:11 pm
arf30 wrote:
Thu Nov 08, 2018 7:46 pm
Mutual funds, but I'll switch if anyone ever rolls out automatic investing for ETFs.
https://www.m1finance.com/
Many brokerages, including Robo-advisers, will automate investing with ETFs.
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Re: Do you prefer etfs or mutual funds?

Post by AlwaysaQ » Sat Nov 10, 2018 10:48 am

I prefer mutual funds. I don't like going to market; not good for the blood pressure.

My two funds at Vanguard have ETF counterparts so if I want to move them I can convert them.

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Re: Do you prefer etfs or mutual funds?

Post by BrooklynInvest » Sat Nov 10, 2018 11:50 am

I have absolutely no need for intra-day trading that ETFs allow for

Tax advantages aren't a given with ETFs - they CAN be a bit more tax efficient in some instances (someone'll correct me if I'm wrong)

Fees and expense ratios matter a lot to me - but only to a point. I tend to lose interest if we're talking about less than 5 bps but each to their own. I'd imagine if you're starting out, the benefits of what I'd consider "extreme frugality" would compound into a meaningful difference

But for ETFs I guess you have to factor all the costs - the spread, the expense ratio, plus any trading costs. I've bought index ETFs in the past but only large blocks of heavily traded - Qs, SPY, DIA. Pre-boglehead.

Welcome to the forum!

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Re: Do you prefer etfs or mutual funds?

Post by Dottie57 » Sat Nov 10, 2018 11:55 am

Mutual funds for fractional purchases. ETFs for quicker settlement and ability to sell and buy in the current trading day. When I rollover my 401k, I may use Vanguard ETFs.

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Re: Do you prefer etfs or mutual funds?

Post by gotester2000 » Sat Nov 10, 2018 12:38 pm

Mutual funds -

1.You dont need a BROKERAGE account.
2. There is no spread in transactions.
3. You can SIP them.
4. There is no brokerage fee for every trade.

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Re: Do you prefer etfs or mutual funds?

Post by sco » Sun Nov 11, 2018 9:27 am

I prefer funds in all my retirement accounts, automatic investment and every penny is invested.

ETFs the only use I have for them might be in a taxable account, and simply due to their portability to any brokerages. You can transfer them around and get bonuses, without concern over whether this funds at that brokerage is available or has a $75 trading fee, etc..

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Re: Do you prefer etfs or mutual funds?

Post by peterinjapan » Sun Nov 11, 2018 9:45 am

ETFs. I don't deal in dinosaurs.

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Re: Do you prefer etfs or mutual funds?

Post by UpperNwGuy » Sun Nov 11, 2018 10:42 am

Mutual funds. I think dinosaurs are cool.

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Re: Do you prefer etfs or mutual funds?

Post by Tamales » Sun Nov 11, 2018 11:50 am

I don't get the comment about spreads with ETFs. If you're using a "total market" type of portfolio, where the ETF trading volume is high, has this ever been an issue for anyone?

Does that imply one should not use, for example VTI, in your auto-invested non-Vanguard 401k account because it might get purchased at some absurd spread?

Speaking of that, if you have ETFs in your auto-purchase 401k account, is the purchase made at the open, close, or some arbitrary mid-day price, or maybe (high+low)/2, after the market close? I don't have any ETFs in my auto-purchase account so I don't know the answer.

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FrugalInvestor
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Re: Do you prefer etfs or mutual funds?

Post by FrugalInvestor » Sun Nov 11, 2018 12:03 pm

motorcyclesarecool wrote:
Thu Nov 08, 2018 5:49 pm
I feel that ETFs have less flexibility in purchasing and selling. I am limited to during business hours and I have to babysit to avoid being hosed on the bid-ask spread. With mutual funds, I can place my order any time and be assured of my execution at a fair price.
I also find the buy/sell process of ETFs to be a hassle. Nothing I do with my investments is so time sensitive that I need transactions to happen same-day rather than overnight. And if I were to place limits on the trade to control the bid/ask spread it potentially prevents the trade from happening anyway. I happily stick with the simplicity and low cost of mutual funds.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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beyou
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Re: Do you prefer etfs or mutual funds?

Post by beyou » Sun Nov 11, 2018 12:16 pm

ETF= Exchange Traded FUND. Mutual Fund is a FUND.
If they are the same index, different share classes of same find, no difference other than fees.

Now for a small investor, ETFs at Vanguard do have smaller fees than the "Investor" class.
For a larger investor that can buy Admiral class, fees are generally same as the ETF class of same fund.
GIven many of the Admiral funds have a $10k minimum, becoming a "large" investor is not as difficult as in some other
funds.

Note not all Vanguard funds are available as ETFs, so for me it's not a matter of one or the other.
I will always have mixture of the two.

I do think that in taxable accounts, ETF portability to move to a new broker is useful in theory, but in practice
i have some funds (munis) that are not available as ETF, so my account is not portable if I wanted to move the whole account,
including my muni Admiral funds. Suppose I could sell the munis, but port away from Vanguard. The main reason to not deal
with Vanguard is the difficulty of OPENING an account, if already opened, I find things just work fine. And no I don't care about
brokerage transfer bonuses (guess I am not 100% BH).

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Re: Do you prefer etfs or mutual funds?

Post by 22twain » Sun Nov 11, 2018 12:36 pm

I own Vanguard's "big three" (total stock, total international and total bond) as ETFs (VTI, VXUS and BND), but that's only because I don't hold them at Vanguard.

When I invested an inheritance about eight years ago, all my retirement investing for 25 years had been in my 403b plan at TIAA. This was my first taxable investment account. I went with T. Rowe Price mutual funds because my father had used them.

A few years later I found Bogleheads and decided to switch to Vanguard's index funds. It seemed easier to open a brokerage account at TRP and buy the ETFs there, than to move the money over to Vanguard and buy the corresponding mutual funds. I make only a handful of trades per year, so the commissions don't bother me. The effective ER of a year's commissions is about .01-.02%.

If I had known about Bogleheads when I started investing the inheritance, I would have put the money directly into mutual funds at Vanguard, because they're simpler to trade in exact dollar amounts instead of only whole shares, and I wouldn't have to wait as long for trades to settle.

Making a contribution to my brokerage Roth IRA at TRP, using funds from my taxable brokerage account, is a bit of a hassle. First sell some ETF shares in the taxable account. Wait a couple of days for the trade to settle. Exchange money from the settlement fund in taxable to the one in the Roth. Wait another day for that to settle. Finally, buy ETF shares in the Roth. If I were using mutual funds, I could do it in a single exchange.
My investing princiPLEs do not include absolutely preserving princiPAL.

JackoC
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Re: Do you prefer etfs or mutual funds?

Post by JackoC » Sun Nov 11, 2018 10:15 pm

Longdog wrote:
Thu Nov 08, 2018 6:29 pm
glennherwig wrote:
Thu Nov 08, 2018 5:23 pm
This is my first thread!

My question... Do you prefer etfs or mutual funds?

I honestly prefer etfs. They have daily liquidity and are tax efficient.
I encourage you to do more research. ETFs are no more or less liquid or tax efficient than index mutual funds.
Tax efficient: I agree, there's not necessarily any difference. Considering Vanguard specifically, as one might due to their track record of low costs, there's no difference. The mutual fund and ETF shares of Vanguard funds (those which have both) are different forms of claim on the same underlying portfolio of assets. If one form of shares of a given fund ever paid capital gains distributions, so would the other.

OTOH comparing index ETF's v actively managed mutual funds, which seems to generally be where people get the idea 'ETF more tax efficient', is apples and oranges.

Liquid: depends what you mean. The ETF has intraday liquidity, the mutual fund does not. But the mutual fund's daily liquidity is at least equal to and arguably superior to the ETF. In normal circumstances it will cash you out at NAV end of day while with the ETF you may end up selling at a market price slightly below NAV. In stressed circumstances the mutual fund advantage may grow as it continues to cash out sellers at theoretical NAV (potentially at the expense of non-selling holders) whereas a lot of sellers might sharply widen an ETF's market discount to NAV. In very extreme circumstances a mutual fund might suspend redemptions but in that case you'd be looking at a very tricky market to sell ETF shares, unless you're able to keep close track of NAV minute to minute.

The other advantage to ETF's I didn't see mentioned (sorry to repeat if it already was) is that you can use them as collateral for margin loans. Being able to borrow on margin isn't necessarily only for using leverage in investing. The ability to borrow against ETF's is a way to have standby liquidity for emergencies rather than actually keeping all your liquidity needs in cash at low yields, or paying fees to have a HELOC, etc. Interactive Brokers has much better margin rates than other retail oriented brokers, and by their portfolio margin system typically allows something like 75% borrowing. If you only ever plan to borrow say 25% a margin call is very unlikely and it's a neat way to have standby liquidity without tying up cash. I keep my ETF's at IB for that reason and it's also a reason I have some of both, MF's and ETF's.

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Re: Do you prefer etfs or mutual funds?

Post by stimulacra » Sun Nov 11, 2018 10:22 pm

I prefer mutual funds. Mostly out of habit… but I find it easier to rebalance and/or buy fractional shares.

I only buy ETFs when no other alternatives exist or there is a dramatic difference in expense ratios.

jalbert
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Re: Do you prefer etfs or mutual funds?

Post by jalbert » Mon Nov 12, 2018 1:26 am

I prefer ETFs in taxable accounts because they are simply more tax efficient. WIth mutual funds you pay capital gains each year.
That depends on the mutual fund. The mutual funds Ive owned in a taxable account have never distributed a capital gain in the time I’ve orned them, and I don’t expect them to. ETFs can at times distribute capital gains also.
Risk is not a guarantor of return.

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Re: Do you prefer etfs or mutual funds?

Post by bearcub » Mon Nov 12, 2018 6:08 am

Mutual Funds because I am a dinosaur. I would probably use a dial phone if I still could. LOL.

augryphon
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Re: Do you prefer etfs or mutual funds?

Post by augryphon » Mon Nov 12, 2018 6:20 am

I prefer funds simply because they are not as quickly traded. Funds soothe my craving to trade and etfs don’t.

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