ETFs vs. Mutual Funds: No Contest

By James | September 21, 2010

Why buy kamagra ETFs?

Well, if exchange traded funds (ETFs) are good enough for Harvard, shouldn’t they be good enough for you?

Harvard University, the richest university in the United States, recently reported large purchases of ETFs that track international markets including China, Brazil and Russia.

By the way, Harvard isn’t the only university utilizing ETFs in its endowment investing; MIT and Yale, among many others, use them, too.

Last I checked there were some pretty smart people at MIT and Yale.

In fact, David Swensen, the manager of Yale’s $16 billion endowment fund,  strongly recommends ETFs.

According to him, ETFs avoid many of the conflicts of interest intrinsic to mutual funds, while frequently delivering better performance with lower cost and greater tax-efficiency.

What are ETFs?

ETFs are similar to mutual funds in that each share gives you a small piece of a basket of hundreds or even thousands of stocks.

Index amoxicillin and the pill ETFs can cover U.S., cheap cytotec online foreign markets, particular sectors, or a particular class of stock (e.g. small-caps, large-caps, micro-caps).

Index ETFs offer good returns without volatility and high fees.

No one can always pick winning stocks,… better to stick to a diversified index that is right for your time horizon.

It’s hard to beat the market; many of Wall Street’s best and brightest can’t do it on a consistent basis.

So why not buy the whole markets using an ETF?

ETFs are a great investing tool individual investor, and they are catching on with large institutional investors as well.

ETFs have numerous advantages over mutual funds.

Here are some reasons why the SimpleVesting strategy utilizes ETFs:

* Intraday Liquidity: ETFs trade all day on an exchange just like a stock. If you want to sell it at 11am, you can sell at 11am, no waiting till the 4pm market close like mutual funds. Whenever the market is open, you can buy or sell ETFs.

* Transparency: You always know what’s in your ETF.  No waiting around for a quarterly report like with mutual funds. Any time of day, this information is readily available on websites such as Morningstar, Yahoo! Finance and the ETF provider’s website.

* Tax Efficiency: Unlike mutual funds, ETFs do not have to hold cash or buy and sell securities buy cialis pill to pay investors when a redemption occurs. For most ETFs, shares can be created as needed, which means greater tax efficiency for you.

* Buy Levitra Lower Fees: An ETF’s annual expenses and trading costs are much lower than non-index mutual funds because, as passive instruments, index ETFs don’t have to pay an active manager’s salary.

* Access to Exotic Asset Classes: Numerous sectors and even leverage are available to you via ETFs but are not available via mutual funds including:

  • Currencies – You can invest in the Euro, British Pound, Japanese Yen, Swedish Krona, Mexican Peso, Swiss Franc, Chinese Yuan, Indian Rupee, Canadian Dollar, buy cheap amoxil Australian Dollar, Russian Ruble, South African Rand, and even the Brazilian Real (I can hear you humming the Girl From Ipanema,… knock it off!)
  • Commodities – You can invest in buy propecia 1mg Sugar, Wheat, Gold, Silver, cialis reviews Platinum, Palladium, Copper, Nickel, Natural Gas, Crude Oil, Unleaded Gas, Cocoa, Coffee, Cotton, Lead, Tin, Aluminum, and even Livestock (Cattle).
  • Leverage – You can invest at 2x or even 3X leverage in numerous sectors and indexes including Gold, the NASDAQ 100, the S&P 500, Treasury Bonds, the Russell 2000, and hundreds of other sectors and index.
  • Country how can i buy clomid Investing – You can invest in hundreds of developed and emerging countries around the world.  Are you a big believer in the power of bratwurst and Mercedes-Benz?  You might consider the iShares MSCI Germany Index (NYSE: EWG).  Do you think the World Cup will change the economy of South Africa for the better?  Then take a look at the iShares South Africa Index (NYSE: EZA).  There is most likely an ETF for just about any reasonably sized country you can think of.  Heck, there’s even a Vietnam ETF.

ETFs are by far the best tool for most individual investors, much better than mutual funds.

That’s why SimpleVesting recommends that investors use ETFs.

However, we do provide mutual fund portfolios for those who, for one reason or another, are dead set on using mutual funds.

As always, it’s your money, the choice is yours.

photo courtesy of sadjina

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Topics: Investing, Money, Retirement, simple market timing, Trading | 6 Comments »

6 Responses to “ETFs vs. Mutual Funds: No Contest”


  1. Kevin McKee Says:
    October 18th, 2010 at 9:23 pm

    I agree. ETFs are much easier than mutual funds. I’m actually surprised that mutual funds are still so prominent with the wide availability of ETFs. However, there isn’t a whole lot of ETF awareness. Nice job pointing it out.

  2. James Fowlkes Says:
    October 19th, 2010 at 12:24 am

    Thanks, Kevin!

  3. Anonymous Says:
    October 20th, 2010 at 4:57 pm

    This is a great post. I currently do not own any ETFs simply because I have not ‘invested’ in awhile, outside of college and retirement. My current investments are in mutual funds though.

    I need to look into ETFs for sure.

  4. James Fowlkes Says:
    October 21st, 2010 at 12:09 pm

    Yep, I think you will find that a lot of asset class options will open up for you with ETFs. Thanks for commenting, Kris!

  5. retireby40 Says:
    October 22nd, 2010 at 4:49 am

    James, I like your site, it is nice and clean.
    Can you compare index ETF to index mutual fund? What is the pro and con?

  6. James Fowlkes Says:
    October 27th, 2010 at 7:04 pm

    Thanks for commenting.
    I will certainly do that, retireby40!

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