The Case Against ETFs

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 2:14 pm

Bogle advocated for traditional index mutual funds over ETFs. He was right!

A Case Against the ETF

1) Behavior: The ETF was designed to trade. It's in the name and it's in the numbers. There are almost as many ETFs as publicly traded stocks in the US. According the Financial Times, "The ETFs impact on stock trading has reached mammoth proportions. They account for nearly one-half of all trading in US stocks. So far in 2016, the dollar volume of trading in the 100 largest ETFs has totalled $13.0tn. Trading in the stocks of the 100 largest US corporations totaled $13.9tn, only slightly larger. But the $1.6tn market capitalization of those ETFs is but a small fraction of the $12.8tn for those corporate stocks. As a result, the annualized turnover rates are different in magnitude: stock turnover, 120 per cent; ETF turnover, 880 per cent. The implications of this rapid trading — call it speculation — have yet to be fully examined."

All of this trading has a negative impact on returns. SPIVA and DALBAR conduct annual studies that clearly document this underperformance. ETFs are like drugs. Once you get hooked you start to abuse them. First it's a low cost index fund, then it's smart beta, then it's factor investing, then it's leveraged products, then it's "nontransparent" ETFs. You get the picture.

2) Inefficiency: Suppose you invest a set amount from your biweekly paycheck. If you choose a mutual fund, you can put all of your money to work right away. But if you choose an ETF, you'll have money left over because most brokerage firms don't let you purchase fractional shares. So you'll always have money sitting on the table, waiting to get into the market, missing those compounding returns. Want to quantify this: the Dow Jones Industrial Average has returned an average of 3 basis points per day over the long term. You could use a less reputable brokerage service that allows you to purchase fractional shares. But guess how they pay for that extra record keeping? They sell your order flow, which means that you get a marginally worse price. No such thing as a free lunch.

3) Tracking Error/Trading Costs: Want to buy an ETF? Expect a premium. Want to sell an ETF? Expect a discount. Interested in a factor / SmartBeta / International strategy? Expect a tracking error. Sure, the bid/ask spread can be a basis point. Same with tracking error. All of these small costs add up and compound over time, hurting returns.

4) Liquidity: Many ETFs now track relatively illiquid assets. The backbone of the ETF is the Authorized Participant (AP). The APs are key to the creation and redemption process. But they are not contractually obligated to play that role. This is a moot point for highly liquid, publicly traded securities. There will always be someone to step in to arbitrage any mismatch in price. But what happens when the ETF has illiquid assets such as junk bonds or "alternative" assets. According to one academic study, "this liquidity mismatch can reduce market eciency and increase the fragility of these ETFs."

5) The ETF Red Herring - tax efficiency: The one supposed benefit of an ETF over an index fund is tax efficiency. But this argument only holds water for higher turn-over ETFs. Take a look at the capital gain distributions for Vanguard's SP500 index fund (VFINX) before 2000. The distributions were all less than half of 1%. Many times way less. Apply a favorable long term capital gains tax rate to that small distribution and it's less than some of the bid-ask spreads for a lot of ETFs today.

Link to studies:
http://www.nber.org/2017LTAM/zeng.html
https://www.aeaweb.org/conference/2018/ ... r/HGzHsdRe
https://academic.oup.com/rof/article-ab ... m=fulltext
Last edited by schooner on Fri Jun 14, 2019 3:48 pm, edited 8 times in total.

HEDGEFUNDIE
Posts: 2731
Joined: Sun Oct 22, 2017 2:06 pm

Re: The Case Against ETFs

Post by HEDGEFUNDIE » Thu Jun 13, 2019 2:48 pm

Two thoughts:

1. The vast majority of actively managed funds are actually mutual funds, not ETFs. This is because ETFs are required to report their holdings daily, which would give away the active manager's strategy.

https://www.fidelity.com/learning-cente ... ly-managed

2. The single worst-conceived fund ever created is a mutual fund, not an ETF. I'm referring to BLPIX, a leveraged fund that tracks 1x the performance of the S&P 500. That's right, a fund that borrows money to match (not exceed) the S&P. It also happens to have a 1.44% ER.

https://www.profunds.com/media/fact_she ... 0455101997

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 2:53 pm

Interesting, totally agree on actively managed mutual funds!

It just seems like there’s a false choice between actively MFs and passive ETFs.

Bogle coined the term Traditional Index Funds. The hallmark of Vanguard.

It seems like Vanguard and Bogleheads are turning away from that vision and embracing riskier and unproven ETF strategies

HEDGEFUNDIE
Posts: 2731
Joined: Sun Oct 22, 2017 2:06 pm

Re: The Case Against ETFs

Post by HEDGEFUNDIE » Thu Jun 13, 2019 2:55 pm

schooner wrote:
Thu Jun 13, 2019 2:53 pm
Interesting, totally agree on actively managed mutual funds!

It just seems like there’s a false choice between actively MFs and passive ETFs.

Bogle coined the term Traditional Index Funds. The hallmark of Vanguard.

It seems like Vanguard and Bogleheads are turning away from that vision and embracing riskier and unproven ETF strategies
Your beef is not with ETFs, it's with non-three-fund-portfolio strategies.

jdilla1107
Posts: 681
Joined: Sun Jun 24, 2012 8:31 pm

Re: The Case Against ETFs

Post by jdilla1107 » Thu Jun 13, 2019 3:01 pm

Your #2 is an illusion and is actually worse for mutual funds. Mutual funds have more cash drag than ETFs. The cash is still sitting in a bank account, just on the other side of the fund. Mutual funds are more inefficient in this regard.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 3:03 pm

Mostly, but I think the inefficiency of not being able to purchase fractional shares is a big drag for small investors. And it pushes them away from Vanguard and towards M1/Robin Hood

That’s true even following 3 fund and choosing low cost ETFs

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 3:05 pm

jdilla1107 wrote:
Thu Jun 13, 2019 3:01 pm
Your #2 is an illusion and is actually worse for mutual funds. Mutual funds have more cash drag than ETFs. The cash is still sitting in a bank account, just on the other side of the fund. Mutual funds are more inefficient in this regard.
I don’t understand. If I have $500, I can invest all of it in VTSAX but not VOO, assuming I am w Vanguard Brokerage. The remainder sits as cash and is not invested until I can buy another share of VOO

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 3:06 pm

schooner wrote:
Thu Jun 13, 2019 2:14 pm
3) Liquidity: Many ETFs now track relatively illiquid assets. The backbone of the ETF is the Authorized Participant (AP). The APs are key to the creation and redemption process. But they are not contractually obligated to play that role. This is a moot point for highly liquid, publicly traded securities. There will always be someone to step in to arbitrage any mismatch in price. But what happens when the ETF has illiquid assets such as junk bonds or "alternative" assets. According to one academic study, "this liquidity mismatch can reduce market eciency and increase the fragility of these ETFs."

This one is the biggest reason I will never again invest in Bond ETFs after the experience in them during the 2008 financial crisis.

During this time (specifically Oct 2008), Bond ETFs containing corporate bonds completely lost connection to their underlying NAVs - or at least the NAVs that the corresponding mutual funds were being priced at - and proved to be completely broken. Even the venerable BND.

This proved to be a great opportunity for those with cash to buy these underpriced ETFs. But for those looking to sell bond ETFs to rebalance into the plummeting stocks of the time, you would have had to sell your bond ETFs at a serious discount to NAV.

At the time, on these boards, many people tried to explain it with some rational sounding explanations but after the smoke had cleared it because clear that in a liquidity crisis, ETFs containing corporate bonds can be seriously problematic. I recall that some time afterward, even Rick Ferri stating that he didn't want to deal with bond ETFs that weren't all nominal treasury because of this.


If you feel like going in a time machine back to this fun time: viewtopic.php?f=10&t=25211&p=298211#p298211
Last edited by moneyman11 on Thu Jun 13, 2019 3:09 pm, edited 1 time in total.

aristotelian
Posts: 5782
Joined: Wed Jan 11, 2017 8:05 pm

Re: The Case Against ETFs

Post by aristotelian » Thu Jun 13, 2019 3:08 pm

Counterpoint. Real timing trading is an advantage. If I want to execute a trade during my lunch break, I can do so, knowing exactly the price I will get. Capital gains tax is a built in incentive to mitigate the temptation to day trade.

The fractional share argument is true, but the most you will have out of market at any one time is the cost of one share. This is also mitigated by buying an ETF with a lower share price. 3 basis points on $100 or less is not going to make a difference to anyone.

Tax efficiency of Vanguard mutual funds is unique to Vanguard. In all other cases, ETF's have a real advantage. (At least until Vanguard's patent expires).

To me it is a case of personal preference.

Socal77
Posts: 156
Joined: Thu Oct 19, 2017 1:14 pm

Re: The Case Against ETFs

Post by Socal77 » Thu Jun 13, 2019 3:11 pm

I like the tax certainty of my three fund Blackrock ETF's. ITOT, IXUS, AGG

sketchy9
Posts: 182
Joined: Mon Oct 25, 2010 2:10 pm

Re: The Case Against ETFs

Post by sketchy9 » Thu Jun 13, 2019 3:15 pm

HEDGEFUNDIE wrote:
Thu Jun 13, 2019 2:48 pm
Two thoughts:

1. The vast majority of actively managed funds are actually mutual funds, not ETFs. This is because ETFs are required to report their holdings daily, which would give away the active manager's strategy.

https://www.fidelity.com/learning-cente ... ly-managed

2. The single worst-conceived fund ever created is a mutual fund, not an ETF. I'm referring to BLPIX, a leveraged fund that tracks 1x the performance of the S&P 500. That's right, a fund that borrows money to match (not exceed) the S&P. It also happens to have a 1.44% ER.

https://www.profunds.com/media/fact_she ... 0455101997
While interesting information, I'm not sure that refutes any of the points made by the OP. When I first started investing, I was an ETF guy because of their low expenses with small amounts of money. However, not being able to buy fractional shares and dealing with bid/ask spreads made me more and more annoyed with them and I finally switched over to mutual funds. I've been happy with them since and have no desire to go back.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 3:19 pm

aristotelian wrote:
Thu Jun 13, 2019 3:08 pm
Counterpoint. Real timing trading is an advantage. If I want to execute a trade during my lunch break, I can do so, knowing exactly the price I will get. Capital gains tax is a built in incentive to mitigate the temptation to day trade.

The fractional share argument is true, but the most you will have out of market at any one time is the cost of one share. This is also mitigated by buying an ETF with a lower share price. 3 basis points on $100 or less is not going to make a difference to anyone.

Tax efficiency of Vanguard mutual funds is unique to Vanguard. In all other cases, ETF's have a real advantage. (At least until Vanguard's patent expires).

To me it is a case of personal preference.
Point taken re personal preference. It’s just my semi-informed opinion ;-)

Re tax efficiency, I was looking back before the Vanguard patent. The SP500 mutual fund capital gain distributions were very small and happened irregularly. It’s really the low turnover that provides the vast majority of its tax efficiency.

Ferdinand2014
Posts: 414
Joined: Mon Dec 17, 2018 6:49 pm

Re: The Case Against ETFs

Post by Ferdinand2014 » Thu Jun 13, 2019 3:27 pm

I started index investing by using ETF’s to mimic the portfolio guidelines from David Swensen’s ‘unconventional success’ in 2009. I found myself changing my mind about allocation ratios to bonds, REITs, etc. An article, a blog, a nightly news report, a quick peek in the middle of the day seeing a price gain or drop silently telling me to buy or sell. It was all to easy to find myself trading. I was constantly churning my portfolio, racking up trading fees, fractional shares sitting there, bid ask spreads gathering silently up. If they were mutual funds, I never would have been doing it because there are 30 day round trip rules, only one NAV a day, etc. There is also counterparty risk. Since I have exclusively used mutual funds, I don’t trade. I buy and hold. Once a month. Behavioral flaw? Sure. Don’t blame the ETF? OK. Problem is, we are human. I can’t change that, but I can choose mutual funds instead. My future self will thank me.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 3:28 pm

moneyman11 wrote:
Thu Jun 13, 2019 3:06 pm
This one is the biggest reason I will never again invest in Bond ETFs after the experience in them during the 2008 financial crisis.

During this time (specifically Oct 2008), Bond ETFs containing corporate bonds completely lost connection to their underlying NAVs - or at least the NAVs that the corresponding mutual funds were being priced at - and proved to be completely broken. Even the venerable BND.

This proved to be a great opportunity for those with cash to buy these underpriced ETFs. But for those looking to sell bond ETFs to rebalance into the plummeting stocks of the time, you would have had to sell your bond ETFs at a serious discount to NAV.
This is largely a myth, perpetuated by a combination of irrational panic and lack of knowledge.

What happened was that the bond ETFs were more liquid than the underlying securities, making the price of the ETFs more accurate (and more current) than the published prices of the bonds they owned. So it's not that the bond ETFs were trading at the wrong prices: it was the published NAVs that were stale.

It's not dissimilar from calling your bank and assuming that the balance they report for your checking account is an accurate of your spendable cash, even though you mailed a check for $5,000 less than ten minutes earlier. Because you have more. up-to-date knowledge than the bank does, you can calculate a more accurate net worth number than the bank can.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

afan
Posts: 4212
Joined: Sun Jul 25, 2010 4:01 pm

Re: The Case Against ETFs

Post by afan » Thu Jun 13, 2019 3:30 pm

1. Buy and hold VTI.
2. Increase your target stock allocation by a few basis points. This will compensate for the effect of buying only whole shares reducing your average stock allocation.
3. VTI has a one penny spread. Sometimes you can trade inside the nominal one cent spread. Not one basis point. One cent, or less.
3a. Spread when selling, also one cent, or less, but don't sell.
3. Liquidity: VTI
4. VTI

Excessive trading: one is no more required to churn an account of etfs than one of stocks or mutual funds. All could be tarded too often. None has to be.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

SantaClaraSurfer
Posts: 43
Joined: Tue Feb 19, 2019 11:09 am

Re: The Case Against ETFs

Post by SantaClaraSurfer » Thu Jun 13, 2019 3:31 pm

I purchase our ETFs @1x month.

I've got a tracker that I follow for our one year strategy. (ex. We are at 30% of our year allocation for SCHB.)

I have a sheet that lets me enter available funds and then purchase blocks of ten and calculate remaining funds based on price per share.

Typically, I purchase blocks of ten shares of ETFs that are at the lowest percent of the annual allocation I've assigned. (ie. Until I get to 100% of the year goal.)

After I've done as many blocks of ten as I can, I purchase smaller increments.

Anything left over (usually under $5) just waits for the next round.

Some of our taxable account is in smaller ETFs (LOWC, SHE) but I've never had a problem purchasing, or getting a good read on the bid/ask. I like being able to put @30% of our taxable into socially conscious investments and ETFs have been an easy way to research and select these and see whether they are a good fit for long term. (I've rigged a spreadsheet that maps these ETFs to a, more or less, Boglehead allocation, btw. It's not that hard to do.)

In general, there may be some premium inherent in the Bid/Ask of ETF shares on any given day (ex. if I compare to bid/ask on Zacks, etc.), but it always appears small and I often come out better than I penciled in. That also means, sometimes, that I can put in a market order that works to my advantage when an ETF opens down for the day. But that does not mean much, ie. with a 10 share purchase even a .50 cent discount over what I might have paid at the end of the day doesn't make a huge impact.

I don't know how I may feel years from now if/when I am looking at getting a cadence for selling. The vast percentage of ETFs I purchase are basically Indexes of readily traded shares, so there's very little I see to be concerned about. Over 50% of our ETFs are the core Schwab ETFs. Can't really see them as anything other than solid long term investments for decades to come. State Street Advisors seem reputable and have low net expenses, as well.
Last edited by SantaClaraSurfer on Thu Jun 13, 2019 3:47 pm, edited 3 times in total.

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 3:32 pm

schooner wrote:
Thu Jun 13, 2019 3:05 pm
jdilla1107 wrote:
Thu Jun 13, 2019 3:01 pm
Your #2 is an illusion and is actually worse for mutual funds. Mutual funds have more cash drag than ETFs. The cash is still sitting in a bank account, just on the other side of the fund. Mutual funds are more inefficient in this regard.
I don’t understand. If I have $500, I can invest all of it in VTSAX but not VOO, assuming I am w Vanguard Brokerage. The remainder sits as cash and is not invested until I can buy another share of VOO
You have to evaluate the complete chain of the transaction: the fact that cash isn't sitting in your brokerage account doesn't mean it's not there and acting as a drag.

Many investors naively assume that ETFs have costs that mutual funds don't have, but this is really more a matter of the ETFs being structurally more transparent than open end mutual funds are.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 3:40 pm

vineviz wrote:
Thu Jun 13, 2019 3:32 pm
schooner wrote:
Thu Jun 13, 2019 3:05 pm
jdilla1107 wrote:
Thu Jun 13, 2019 3:01 pm
Your #2 is an illusion and is actually worse for mutual funds. Mutual funds have more cash drag than ETFs. The cash is still sitting in a bank account, just on the other side of the fund. Mutual funds are more inefficient in this regard.
I don’t understand. If I have $500, I can invest all of it in VTSAX but not VOO, assuming I am w Vanguard Brokerage. The remainder sits as cash and is not invested until I can buy another share of VOO
You have to evaluate the complete chain of the transaction: the fact that cash isn't sitting in your brokerage account doesn't mean it's not there and acting as a drag.

Many investors naively assume that ETFs have costs that mutual funds don't have, but this is really more a matter of the ETFs being structurally more transparent than open end mutual funds are.
I am genuinely confused. Are you saying that I don’t actually own a fractional mutual fund share until I put in enough money to make it a whole share. I’ve held VTSAX for years, and my balance always equals the number of whole and fractional shares multiplied by the NAV. If I invest $500 in VTSAX, it’s fully invested. But I can not buy $500 of VOO

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 3:40 pm

vineviz wrote:
Thu Jun 13, 2019 3:28 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:06 pm
This one is the biggest reason I will never again invest in Bond ETFs after the experience in them during the 2008 financial crisis.

During this time (specifically Oct 2008), Bond ETFs containing corporate bonds completely lost connection to their underlying NAVs - or at least the NAVs that the corresponding mutual funds were being priced at - and proved to be completely broken. Even the venerable BND.

This proved to be a great opportunity for those with cash to buy these underpriced ETFs. But for those looking to sell bond ETFs to rebalance into the plummeting stocks of the time, you would have had to sell your bond ETFs at a serious discount to NAV.
This is largely a myth, perpetuated by a combination of irrational panic and lack of knowledge.

What happened was that the bond ETFs were more liquid than the underlying securities, making the price of the ETFs more accurate (and more current) than the published prices of the bonds they owned. So it's not that the bond ETFs were trading at the wrong prices: it was the published NAVs that were stale.

It's not dissimilar from calling your bank and assuming that the balance they report for your checking account is an accurate of your spendable cash, even though you mailed a check for $5,000 less than ten minutes earlier. Because you have more. up-to-date knowledge than the bank does, you can calculate a more accurate net worth number than the bank can.

So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?

Because that's a REAL thing that happened. Not a myth.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 4:13 pm

Ferdinand2014 wrote:
Thu Jun 13, 2019 3:27 pm
I started index investing by using ETF’s to mimic the portfolio guidelines from David Swensen’s ‘unconventional success’ in 2009. I found myself changing my mind about allocation ratios to bonds, REITs, etc. An article, a blog, a nightly news report, a quick peek in the middle of the day seeing a price gain or drop silently telling me to buy or sell. It was all to easy to find myself trading. I was constantly churning my portfolio, racking up trading fees, fractional shares sitting there, bid ask spreads gathering silently up. If they were mutual funds, I never would have been doing it because there are 30 day round trip rules, only one NAV a day, etc. There is also counterparty risk. Since I have exclusively used mutual funds, I don’t trade. I buy and hold. Once a month. Behavioral flaw? Sure. Don’t blame the ETF? OK. Problem is, we are human. I can’t change that, but I can choose mutual funds instead. My future self will thank me.
Ha, I did the same thing 10 years ago! ETFs are addictive. You have so many options and can trade all day. They have wacky names and fervent commentators. But just like gambling, the ultimate winner is the (brokerage) house.

The most disconcerting part is that Vanguard is pushing this stuff like candy: 1800 Commission Free ETFs, hooray! Where is the Vanguard study on how their investors perform after switching to ETFs. All of the research I find raises red flags

EyeDee
Posts: 1319
Joined: Tue Feb 20, 2007 12:15 am

Re: The Case Against ETFs

Post by EyeDee » Thu Jun 13, 2019 4:15 pm

.
Schooner,

An additional consideration that argues against ETFs: Since ETFs require use of various time brokerage orders for buying and selling, eventually your older self and your survivors (particularly an older spouse) might have problems dealing with the mechanics of ETFs verses ordinary index mutual funds. I would not want to give that headache to my wife nor my older self.
schooner wrote:
Thu Jun 13, 2019 2:14 pm
Bogle advocates for traditional index mutual funds over ETFs. He was right!

A Case Against the ETF . . .
Randy

azanon
Posts: 2429
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR
Contact:

Re: The Case Against ETFs

Post by azanon » Thu Jun 13, 2019 4:24 pm

I use a threshold rebalancing method (20% bands) ~ 20 trading days (Michael Kitces recommends 20% every 10 business days). You can do that easily with ETFs during market hours and with a considerable level of precision.

And with mutual funds? At my brokerage (Vanguard), if you put in an order sell shares of a Mutual fund, that transaction won't happen until COB. Worse, you won't be buying back into that fund for at least 30 days, per Vanguard restrictions. And since you sold at COB, if the market happens to explode overnight, then you miss out on all of that gain because funds don't sell until COB.

I'm sure it's been mentioned already (surely), but in taxable accounts, its no contest; ETFs are considerably more efficient. And active mutual funds can be a tax nightmare.

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 4:25 pm

moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 4:28 pm

EyeDee wrote:
Thu Jun 13, 2019 4:15 pm
.
Schooner,

An additional consideration that argues against ETFs: Since ETFs require use of various time brokerage orders for buying and selling, eventually your older self and your survivors (particularly an older spouse) might have problems dealing with the mechanics of ETFs verses ordinary index mutual funds. I would not want to give that headache to my wife nor my older self.
schooner wrote:
Thu Jun 13, 2019 2:14 pm
Bogle advocates for traditional index mutual funds over ETFs. He was right!

A Case Against the ETF . . .
Good point, hadn’t thought of that! A friend of mine has a roboadvisor and the 1099 from all of the “tax harvesting” they did with ETFs was crazy. What a mess, and meanwhile the robo is racking up management fees and selling order flow. I think they had some bizarre “risk parity” strategy too

Three Fund Portfolio in traditional mutual index funds. Boring but probably works better than most everything else

MittensMoney
Posts: 168
Joined: Mon Dec 07, 2015 10:59 pm

Re: The Case Against ETFs

Post by MittensMoney » Thu Jun 13, 2019 4:32 pm

Compare the mutual funds that Bogleheads actually use and their ETF counterparts. For a 3-fund portfolio properly managed per Boglehead standards the ONLY discernible difference is the preferable tax treatment of ETFs. In my mind that makes ETFs the winner.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 4:39 pm

MittensMoney wrote:
Thu Jun 13, 2019 4:32 pm
Compare the mutual funds that Bogleheads actually use and their ETF counterparts. For a 3-fund portfolio properly managed per Boglehead standards the ONLY discernible difference is the preferable tax treatment of ETFs. In my mind that makes ETFs the winner.
A few notes:

The top line performance figure on Vanguard’s website is NAV, you have to toggle to see “market performance.” For VTI year end 5/31, the market performance lagged NAV by 2 basis points. It could go other way, it’s just another risk

The performance also doesn’t factor in premium spread when you purchased the security (others can correct me, I’m a bit shaky on this one). This can add up if you’re DCA and DRIP.

HEDGEFUNDIE
Posts: 2731
Joined: Sun Oct 22, 2017 2:06 pm

Re: The Case Against ETFs

Post by HEDGEFUNDIE » Thu Jun 13, 2019 4:44 pm

sketchy9 wrote:
Thu Jun 13, 2019 3:15 pm
HEDGEFUNDIE wrote:
Thu Jun 13, 2019 2:48 pm
Two thoughts:

1. The vast majority of actively managed funds are actually mutual funds, not ETFs. This is because ETFs are required to report their holdings daily, which would give away the active manager's strategy.

https://www.fidelity.com/learning-cente ... ly-managed

2. The single worst-conceived fund ever created is a mutual fund, not an ETF. I'm referring to BLPIX, a leveraged fund that tracks 1x the performance of the S&P 500. That's right, a fund that borrows money to match (not exceed) the S&P. It also happens to have a 1.44% ER.

https://www.profunds.com/media/fact_she ... 0455101997
While interesting information, I'm not sure that refutes any of the points made by the OP. When I first started investing, I was an ETF guy because of their low expenses with small amounts of money. However, not being able to buy fractional shares and dealing with bid/ask spreads made me more and more annoyed with them and I finally switched over to mutual funds. I've been happy with them since and have no desire to go back.
The OP’s first point is that ETFs enable bad behavior. If you equate active management to bad behavior, mutual funds clearly enable more of that than ETFs.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 4:56 pm

I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.

The choice is not just active MF vs. passive ETF. That’s a false dichotomy that Bogle fought against. I’m arguing that a passive mutual fund (for the reasons stated above) will produce a superior return for investors

Broken Man 1999
Posts: 2691
Joined: Wed Apr 08, 2015 11:31 am

Re: The Case Against ETFs

Post by Broken Man 1999 » Thu Jun 13, 2019 5:14 pm

EyeDee wrote:
Thu Jun 13, 2019 4:15 pm
.
Schooner,

An additional consideration that argues against ETFs: Since ETFs require use of various time brokerage orders for buying and selling, eventually your older self and your survivors (particularly an older spouse) might have problems dealing with the mechanics of ETFs verses ordinary index mutual funds. I would not want to give that headache to my wife nor my older self.
schooner wrote:
Thu Jun 13, 2019 2:14 pm
Bogle advocates for traditional index mutual funds over ETFs. He was right!

A Case Against the ETF . . .
Apparently you didn't read what Mr Bogle said about ETFs in his last book. He had no issues with ETFs that followed broad-based indexes, bought to hold. Buy a copy of his last book, and tell us what he said, don't take my word for it.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 5:18 pm

schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 5:20 pm

Broken Man 1999 wrote:
Thu Jun 13, 2019 5:14 pm
EyeDee wrote:
Thu Jun 13, 2019 4:15 pm
.
Schooner,

An additional consideration that argues against ETFs: Since ETFs require use of various time brokerage orders for buying and selling, eventually your older self and your survivors (particularly an older spouse) might have problems dealing with the mechanics of ETFs verses ordinary index mutual funds. I would not want to give that headache to my wife nor my older self.
schooner wrote:
Thu Jun 13, 2019 2:14 pm
Bogle advocates for traditional index mutual funds over ETFs. He was right!

A Case Against the ETF . . .
Apparently you didn't read what Mr Bogle said about ETFs in his last book. He had no issues with ETFs that followed broad-based indexes, bought to hold. Buy a copy of his last book, and tell us what he said, don't take my word for it.

Broken Man 1999
The key phrase seems to be “bought and hold.” Academic research and industry statistics indicate that ETFs temp people to do the exact opposite. I haven’t read his last book but read others, i’ll check it out :-)
Last edited by schooner on Thu Jun 13, 2019 5:25 pm, edited 1 time in total.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 5:24 pm

vineviz wrote:
Thu Jun 13, 2019 5:18 pm
schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
SPIVA and DALBAR both report active performance every year. The performance is abysmal.

Also, check out William Sharpe’s Arithmetic of Active Management. It’s a short article by a Noble Prize winner available online

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 5:29 pm

vineviz wrote:
Thu Jun 13, 2019 4:25 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.

livesoft
Posts: 66907
Joined: Thu Mar 01, 2007 8:00 pm

Re: The Case Against ETFs

Post by livesoft » Thu Jun 13, 2019 5:31 pm

Well, now that we all know the problems with ETFs, we can use them and avoid all those problems quite easily.

For instance, if a bond ETF has a liquidity problem, we can provide that liquidity by purchasing bond ETF shares when they drop way more than expected. Of if there is a "flash crash" in a few equity ETFs, then we can buy them intraday when they are in crash mode and score some easy money. We can also look up the premium/discount and buy them when they have a discount to NAV. And so on.
Wiki This signature message sponsored by sscritic: Learn to fish.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 5:34 pm

livesoft wrote:
Thu Jun 13, 2019 5:31 pm
Well, now that we all know the problems with ETFs, we can use them and avoid all those problems quite easily.
This is like saying that we can safely use cigarettes because we know how they cause cancer.

I’d argue the problems with ETFs I outlined are features of the product not bugs imho

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 5:36 pm

schooner wrote:
Thu Jun 13, 2019 5:24 pm
vineviz wrote:
Thu Jun 13, 2019 5:18 pm
schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
SPIVA and DALBAR both report active performance every year. The performance is abysmal.

Also, check out William Sharpe’s Arithmetic of Active Management. It’s a short article by a Noble Prize winner available online
None of that speaks at all to your point: there are virtually no actively managed equity ETFs and vanishingly few actively managed fixed income ETFs.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

User avatar
vineviz
Posts: 4373
Joined: Tue May 15, 2018 1:55 pm

Re: The Case Against ETFs

Post by vineviz » Thu Jun 13, 2019 5:38 pm

moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm
vineviz wrote:
Thu Jun 13, 2019 4:25 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Wakefield1
Posts: 1009
Joined: Mon Nov 14, 2016 10:10 pm

Re: The Case Against ETFs

Post by Wakefield1 » Thu Jun 13, 2019 5:39 pm

What happened to the name "vipers"? Was that Mr. Bogle's name for ETFs?

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 5:39 pm

vineviz wrote:
Thu Jun 13, 2019 5:36 pm
schooner wrote:
Thu Jun 13, 2019 5:24 pm
vineviz wrote:
Thu Jun 13, 2019 5:18 pm
schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
SPIVA and DALBAR both report active performance every year. The performance is abysmal.

Also, check out William Sharpe’s Arithmetic of Active Management. It’s a short article by a Noble Prize winner available online
None of that speaks at all to your point: there are virtually no actively managed equity ETFs and vanishingly few actively managed fixed income ETFs.
DALBAR conducts a survey specifically of retail investors.

And if you trade passive ETFs regularly and engage in various strategies to time or beat the market, I’d argue you are an active manager of your personal portfolio

HEDGEFUNDIE
Posts: 2731
Joined: Sun Oct 22, 2017 2:06 pm

Re: The Case Against ETFs

Post by HEDGEFUNDIE » Thu Jun 13, 2019 5:40 pm

schooner wrote:
Thu Jun 13, 2019 5:24 pm
vineviz wrote:
Thu Jun 13, 2019 5:18 pm
schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
SPIVA and DALBAR both report active performance every year. The performance is abysmal.

Also, check out William Sharpe’s Arithmetic of Active Management. It’s a short article by a Noble Prize winner available online
These reports do nothing to support your argument.

Show me a report that says ETF investors receive worse returns than mutual fund investors. Or that ETF investors trade more often than mutual fund investors.

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 5:45 pm

vineviz wrote:
Thu Jun 13, 2019 5:38 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm
vineviz wrote:
Thu Jun 13, 2019 4:25 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.
It's not clear to me what evidence you are asking for.
What are you claiming is "incorrect"?

livesoft
Posts: 66907
Joined: Thu Mar 01, 2007 8:00 pm

Re: The Case Against ETFs

Post by livesoft » Thu Jun 13, 2019 5:46 pm

schooner wrote:
Thu Jun 13, 2019 5:34 pm
This is like saying that we can safely use cigarettes because we know how they cause cancer.
I think that is an absurd idea. It is not like that at all.
Wiki This signature message sponsored by sscritic: Learn to fish.

Broken Man 1999
Posts: 2691
Joined: Wed Apr 08, 2015 11:31 am

Re: The Case Against ETFs

Post by Broken Man 1999 » Thu Jun 13, 2019 5:50 pm

OP, why do you care what others do?

Obviously if one cannot resist temptations, there are many things they should probably avoid.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

columbia
Posts: 1634
Joined: Tue Aug 27, 2013 5:30 am

Re: The Case Against ETFs

Post by columbia » Thu Jun 13, 2019 5:51 pm

jdilla1107 wrote:
Thu Jun 13, 2019 3:01 pm
Your #2 is an illusion and is actually worse for mutual funds. Mutual funds have more cash drag than ETFs. The cash is still sitting in a bank account, just on the other side of the fund. Mutual funds are more inefficient in this regard.
Not if you’re buying Vanguard mutual funds, which have a companion ETF.

User avatar
WoodSpinner
Posts: 738
Joined: Mon Feb 27, 2017 1:15 pm

Re: The Case Against ETFs

Post by WoodSpinner » Thu Jun 13, 2019 5:55 pm

For me it’s quite simple.

Retired and in a decumulation phase.

I use ETFs (VTI, VXUS, VGSH, VGIT). Typically rebalance per my IPS, 20% band, otw once a year.

My trades in ETFs are free at Fidelity and Merrill Edge — either provides Superior service and benefits to the Vanguard platform.

Certainly understand the risks you have outlined but can’t see myself falling prey to any of them.


I really appreciate this thread — a great gut check on my approach. Plus the thread you linked around BND behavior and the price mismatch between NAV and Marketprice was eye opening.

This quote struck me as some good advice that I need to incorporate into my IPS.
I have said many times that long-term investors should not trade ETFs in the first hour or the last hour of the trading day. And only trade when prices have been stable for an hour or so. Long-term investors should not try to trade in a fast moving market.

Rick Ferri
WoodSpinner
Last edited by WoodSpinner on Thu Jun 13, 2019 6:05 pm, edited 1 time in total.

User avatar
jeffyscott
Posts: 8002
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: The Case Against ETFs

Post by jeffyscott » Thu Jun 13, 2019 5:59 pm

moneyman11 wrote:
Thu Jun 13, 2019 5:45 pm
vineviz wrote:
Thu Jun 13, 2019 5:38 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm
vineviz wrote:
Thu Jun 13, 2019 4:25 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.
It's not clear to me what evidence you are asking for.
What are you claiming is "incorrect"?
Perhaps this meets the challenge :?: :
Image
http://performance.morningstar.com/fund ... ture=en_US
Time is your friend; impulse is your enemy. - John C. Bogle

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 6:00 pm

vineviz wrote:
Thu Jun 13, 2019 5:38 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm
vineviz wrote:
Thu Jun 13, 2019 4:25 pm
moneyman11 wrote:
Thu Jun 13, 2019 3:40 pm
So, when Vanguard was allowing redemptions of VBTLX at 6% higher than what BND was selling for during the days detailed in the thread I linked to, they were just ripping themselves off because they were redeeming shares in the mutual fund using the wrong prices for the underlying assets?
What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.

I posted another reply asking exactly what evidence you are asking of me, but in the meantime here is a well regarded Boglehead discussing the phenomenon I'm referring to - https://thefinancebuff.com/buy-bond-etf ... e-nav.html
Last edited by moneyman11 on Thu Jun 13, 2019 6:05 pm, edited 1 time in total.

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 6:01 pm

jeffyscott wrote:
Thu Jun 13, 2019 5:59 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:45 pm
vineviz wrote:
Thu Jun 13, 2019 5:38 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm
vineviz wrote:
Thu Jun 13, 2019 4:25 pm


What you’re describing did not actually happen. The thread you mentioned is an example of the way narratives get distorted when people don’t yet have complete information.

It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.
It's not clear to me what evidence you are asking for.
What are you claiming is "incorrect"?
Perhaps this meets the challenge :?: :
Image
http://performance.morningstar.com/fund ... ture=en_US
YES! Excellent. Thank you. Would have been nice if this chart had gone back to 2008, but much about the financial crisis is starting to fall off of the typical 10 year record keeping period of most sites.

Topic Author
schooner
Posts: 173
Joined: Sun Jun 09, 2019 8:27 am

Re: The Case Against ETFs

Post by schooner » Thu Jun 13, 2019 6:06 pm

HEDGEFUNDIE wrote:
Thu Jun 13, 2019 5:40 pm
schooner wrote:
Thu Jun 13, 2019 5:24 pm
vineviz wrote:
Thu Jun 13, 2019 5:18 pm
schooner wrote:
Thu Jun 13, 2019 4:56 pm
I agree that active mutual funds are bad. But I’d argue that “passive” ETFs have encouraged investors to trade more frequently. And this hurts returns.
You could argue it, but without any evidence how convinced should anyone be by that argument?
SPIVA and DALBAR both report active performance every year. The performance is abysmal.

Also, check out William Sharpe’s Arithmetic of Active Management. It’s a short article by a Noble Prize winner available online
These reports do nothing to support your argument.

Show me a report that says ETF investors receive worse returns than mutual fund investors. Or that ETF investors trade more often than mutual fund investors.
“arbitrage activity negatively predicts subsequent returns and ETF investors, in aggregate, underperform benchmarks.”

Source: https://www.aeaweb.org/conference/2018/ ... r/HGzHsdRe

Can you find an academic study that shows ETF investors perform better than traditional index mutual fund investors who match NAV and benchmarks less expense ratio.

moneyman11
Posts: 541
Joined: Tue Feb 19, 2008 10:09 am

Re: The Case Against ETFs

Post by moneyman11 » Thu Jun 13, 2019 6:09 pm

moneyman11 wrote:
Thu Jun 13, 2019 6:01 pm
jeffyscott wrote:
Thu Jun 13, 2019 5:59 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:45 pm
vineviz wrote:
Thu Jun 13, 2019 5:38 pm
moneyman11 wrote:
Thu Jun 13, 2019 5:29 pm



It absolutely did happen.

In addition, Vanguard posted the discount to NAV for the ETF nightly, and it showed clearly that there was an unprecedented difference during that time.

And when it finally resolved, and the ETF price and the underlying NAV returned to more normal difference, it was the ETF price that snapped back up to the NAV (which was in line with the mutual fund NAV), and not the other way around.
Sorry, but this is simply incorrect.

If you’ve got a reliable source that says otherwise, I’d love to see it.
It's not clear to me what evidence you are asking for.
What are you claiming is "incorrect"?
Perhaps this meets the challenge :?: :
Image
http://performance.morningstar.com/fund ... ture=en_US
YES! Excellent. Thank you. Would have been nice if this chart had gone back to 2008, but much about the financial crisis is starting to fall off of the typical 10 year record keeping period of most sites.
As further evidence, see the same chart for VBTLX:

http://performance.morningstar.com/fund ... ture=en_US

The return on the NAV of VBTLX is very close to the return on the NAV of BND in 2009 (and all subsequent years), but well more than the return on the PRICE of BND, clearly showing that it's the price of BND in 2009 that was the outlier.

Locked