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ETF or mutual funds
Old 10-24-2004, 06:42 AM   #1
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ETF or mutual funds

I will soon be ERing and will be rolling my 401K into a IRA. Do most here put their money into mutual funds or ETF. I'm still confused on the advantages, if any, of both.

I'll still be buying some individual stocks but prefer to put the bulk into index's.

I also will be investing more in my taxable accounts also.
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Re: ETF or mutual funds
Old 10-24-2004, 08:41 PM   #2
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Re: ETF or mutual funds

Some ETFs have slightly lower expense ratios than
mutual funds. Another advantage is that you can
buy and sell them like stocks if you like to "trade" or
set stop loss orders, etc.

The disadvantage, of course, is that every transaction costs you a commission. Thus ETFs are not good for
people who are DCAing into the market or need to
sell frequently to raise cash.

Somehow I just can't get excited over using them.

Cheers,

Charlie
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Re: ETF or mutual funds
Old 10-24-2004, 08:50 PM   #3
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Re: ETF or mutual funds

A few other advantages...some funds have high minimums, like $25,000, while you can buy one share of the equivalent ETF. Some funds have an "early withdrawal penalty" that charge you 1-5% for taking your money out in less than 90 days to 5 years, depending on the fund. No such situation with ETF's.

If you're going to buy once and hold a long time without change, pick whichever one is cheapest in purchase and expense costs. If you're going to buy very often, a no load no transaction cost mutual fund might come out ahead. If you cant meet the fund minimums or you plan to sell before a minimum holding period, buy the ETF.
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Re: ETF or mutual funds
Old 10-25-2004, 05:40 AM   #4
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Re: ETF or mutual funds

I'd be surprised if any of the $25k minimum funds had equivalent ETF's available, but the point is taken.

When I changed jobs and rolled over my IRA to a 401(k) they didn't sell & buy assets; they just rolled over my existing investments. My 401(k)'s trustee was Vanguard and I rolled into a Vanguard account, so I don't know if this is something everyone can do or if my staying with the same investment company allowed me to do that.
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Re: ETF or mutual funds
Old 10-25-2004, 07:13 AM   #5
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Re: ETF or mutual funds

One additional point about ETFs:

ETFs are more transparent than funds, so it is harder for miscreants to defraud ETF investors. I'm sure there are ways to screw around with ETFs, but ETFs look a little lower risk to me on the fraud front.
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Re: ETF or mutual funds
Old 10-25-2004, 08:33 AM   #6
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Re: ETF or mutual funds

An additional plus for ETFs is that many mutual funds will only sell to residents of certain countries or they may set a very large minimum (i.e. $250K). I keep my taxable account in ETFs for just such a reason. I am currently a US tax resident but when I FIRE I'll cease to be one. If I was with Vanguard or some such there would be problems if and when they found out that I wasn't a US tax resident.

To keep the brokerage costs down I invest in only a few ETFs and make purchases only a couple of times per year with large batches of cash. The rest of the portfolio is in tax deferred accounts where I can and do hold some mutual funds and use them for buy-sell rebalancing. (The rules on non-US tax residents IRAs is different than taxable accounts.)
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Re: ETF or mutual funds
Old 10-26-2004, 12:25 PM   #7
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Re: ETF or mutual funds

Quote:
I'd be surprised if any of the $25k minimum funds had equivalent ETF's available, but the point is taken.
I just looked quick, and found this:

Vanguard health care, 25k minimum, penalty of 1% on shares held less than 5 years.
Vanguard health index, 250k minimum, same penalty

Vanguard health care vipers, one share minimum, no penalties for early withdrawal.

I see they also have an Energy viper, and the energy fund has a large minimum.

I think there are SOME differences between the viper holdings and the funds, but in looking at the top 10 holdings that are >50% of the fund content, they appear at least similar.
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