Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

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kosomoto
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Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by kosomoto » Mon Dec 12, 2016 10:39 am

Does anybody know which funds Bogle is referring to where the ETF is 1.6% lower than the mutual fund at the end of the year?

https://www.ft.com/content/855c1152-be3 ... b81dd5d080

691175002
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by 691175002 » Mon Dec 12, 2016 10:44 am

I think he is implying that the returns actually achieved by investors in the 3000% turnover ETF are lower than in the 8% turnover mutual fund, not that one underperforms the other.

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goingup
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by goingup » Mon Dec 12, 2016 10:55 am

I'd love to read that but FT articles require subscription.

Jack B. has gone on record saying ETFs make it too easy to trade, which is the opposite of what a buy and hold investor should be doing. I would guess he is referring to the collective behavior of ETF holders, but I couldn't access the article.

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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Call_Me_Op » Mon Dec 12, 2016 12:26 pm

691175002 wrote:I think he is implying that the returns actually achieved by investors in the 3000% turnover ETF are lower than in the 8% turnover mutual fund, not that one underperforms the other.
Yes, this is not ETF performance, it is lagging due to attempts to time the market.
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Minot
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Minot » Mon Dec 12, 2016 12:35 pm

The underlying Financial Times article, also written by Bogle, spells it out more clearly. Click on the 1st link (in the box under Top Stories on this Google page to get access to the article.
Vanguard’s patented structure for ETFs — in which both its Tifs [traditional index funds] and ETFs are shares of the same underlying portfolio — presents a unique test case for evaluating investor outcomes in the two types of index funds. Over the past months, Tif investor returns were a few basis points higher than fund returns in each of the five largest Vanguard broad-market index funds [underlining mine]. In contrast, returns earned by the firm’s ETF investors — owning the identical underlying portfolios — trailed the returns of the funds by an average of 1.6 per cent during the same period. This anecdotal evidence seems to confirm the consensus that higher trading activity takes its toll on investor wealth.

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Earl Lemongrab
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Earl Lemongrab » Mon Dec 12, 2016 1:29 pm

Why would I care what other investors are doing?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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FIREchief
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by FIREchief » Mon Dec 12, 2016 3:43 pm

I've never bought an ETF share of anything in the open market. That said, I recently was considering buying a short term TIPS fund for my Fido brokerage account. VTIP (VG short term TIPS ETF) appeared to be the one most worthy of my consideration. Sounded simple, just put in a market order, pay the $7.95 commission plus bid/ask spread and I'm done. Right? Well, not so fast. For a larger amount, the market order could bite me. So I educated myself on limit orders. Large amount/limit order/good til cancelled. Will that work? Maybe. I would need to figure out how to determine an efficient/effective limit based upon current share pricing. Oh, and if the order is filled over three trading days, I would pay three $7.95 commissions. This is easy? This is cheap? :confused

I'm guessing that if I went down that road, I would learn a lot and probably do okay. That said, I'm now leaning towards just starting to buy some five year TIPS at auction (the "roll your own" approach). 8-)
Last edited by FIREchief on Mon Dec 12, 2016 7:33 pm, edited 1 time in total.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

pshonore
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by pshonore » Mon Dec 12, 2016 5:36 pm

FIREchief wrote:I've never bought an ETF share of anything in the open market. That said, I recently was considering buying a short term TIPS fund for my Fido brokerage account. VTIP (VG short term TIPS ETF) appeared to be the one most worthy of my consideration. Sounded simple, just put in a market order, pay the $7.95 commission plus bid/ask spread and I'm done. Right? Well, not so fast. For a larger amount, the market order could bite me. So I educated myself on limit orders. Large amount/limit order/open til cancelled. Will that work? Maybe. I would need to figure out how to determine an efficient/effective limit based upon current share pricing. Oh, and if the order is filled over three trading days, I would pay three $7.95 commissions. This is easy? This is cheap? :confused

I'm guessing that if I went down that road, I would learn a lot and probably do okay. That said, I'm now leaning towards just starting to buy some five year TIPS at auction (the "roll your own" approach). 8-)
You cab buy the following I shares US Treasury ETFs at Fido with no commission:

Barclays U.S. Treasury Bond ( GOVT )
Barclays 20+ Year Treasury Bond ( TLT )
Barclays 1–3 Year Treasury Bond ( SHY )
Barclays TIPS Bond ( TIP )
Barclays 3-7 Year Treasury Bond ( IEI )
Barclays 7–10 Year Treasury Bond ( IEF )
Barclays 0–5 Year TIPS Bond ( STIP )
Barclays U.S. Short Treasury Bond Index ( SHV )

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Earl Lemongrab
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Earl Lemongrab » Mon Dec 12, 2016 5:42 pm

If you're really concerned about multiple commissions, you can select "All or None" in Conditions. I'm not entirely sure if Fidelity does charge multiple commissions if the order gets broken up. Highly liquid ETFs tend to not take days to execute.

I haven't paid a commission very often. When I buy at Fidelity, I use the commission-free ETFs. For this case, I'd look at STIP.

There have been numerous posts on the forums about how to construct a marketable limit order.
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Toons
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Toons » Mon Dec 12, 2016 5:43 pm

Buy and Sell
Buy and Sell.
How does compounding work for you that way. :happy
Oh well to each their own. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

pshonore
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by pshonore » Mon Dec 12, 2016 6:02 pm

Earl Lemongrab wrote:If you're really concerned about multiple commissions, you can select "All or None" in Conditions. I'm not entirely sure if Fidelity does charge multiple commissions if the order gets broken up. Highly liquid ETFs tend to not take days to execute.

I haven't paid a commission very often. When I buy at Fidelity, I use the commission-free ETFs. For this case, I'd look at STIP.

There have been numerous posts on the forums about how to construct a marketable limit order.
I've had an order filled over the course of a day with one commission. If you change a partially filled order (different quantity, price) you will get charged another commission. Not sure about an order filled over multiple days. (My orders are typically same day)

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Earl Lemongrab
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by Earl Lemongrab » Mon Dec 12, 2016 6:22 pm

Toons wrote:Buy and Sell
Buy and Sell.
How does compounding work for you that way. :happy
Oh well to each their own. :happy
When your IPS says to buy, you buy
When your IPS says to sell, you sell
Then your asset allocation won't go awry
So ETFs are just swell
Burma Shave.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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FIREchief
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by FIREchief » Mon Dec 12, 2016 7:27 pm

Earl Lemongrab wrote:
Toons wrote:Buy and Sell
Buy and Sell.
How does compounding work for you that way. :happy
Oh well to each their own. :happy
When your IPS says to buy, you buy
When your IPS says to sell, you sell
Then your asset allocation won't go awry
So ETFs are just swell
Burma Shave.
Sweet!!! 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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FIREchief
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Re: Bogle: ETF investors’ returns trailed by 1.6 percent over 12 months.

Post by FIREchief » Mon Dec 12, 2016 7:31 pm

pshonore wrote:
FIREchief wrote:I've never bought an ETF share of anything in the open market. That said, I recently was considering buying a short term TIPS fund for my Fido brokerage account. VTIP (VG short term TIPS ETF) appeared to be the one most worthy of my consideration. Sounded simple, just put in a market order, pay the $7.95 commission plus bid/ask spread and I'm done. Right? Well, not so fast. For a larger amount, the market order could bite me. So I educated myself on limit orders. Large amount/limit order/open til cancelled. Will that work? Maybe. I would need to figure out how to determine an efficient/effective limit based upon current share pricing. Oh, and if the order is filled over three trading days, I would pay three $7.95 commissions. This is easy? This is cheap? :confused

I'm guessing that if I went down that road, I would learn a lot and probably do okay. That said, I'm now leaning towards just starting to buy some five year TIPS at auction (the "roll your own" approach). 8-)
You cab buy the following I shares US Treasury ETFs at Fido with no commission:

Barclays U.S. Treasury Bond ( GOVT )
Barclays 20+ Year Treasury Bond ( TLT )
Barclays 1–3 Year Treasury Bond ( SHY )
Barclays TIPS Bond ( TIP )
Barclays 3-7 Year Treasury Bond ( IEI )
Barclays 7–10 Year Treasury Bond ( IEF )
Barclays 0–5 Year TIPS Bond ( STIP )
Barclays U.S. Short Treasury Bond Index ( SHV )
Since (as I mentioned) I was looking for a short term TIPS ETF, I did check out STIP. 2 basis points higher ER. Much less liquidity, so higher expected bid/ask spread. Looked like I could pay several $7.95 commissions to buy (and HOLD - attn: toons) VTIP and still come out clearly ahead. Problem is, when it comes to this ETF stuff, I'm an idiot. I'll never do it often enough to get good at it, so let's call the whole thing off. :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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