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ETFs - flavor of the month?
Old 07-19-2010, 09:10 PM   #1
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ETFs - flavor of the month?

In the same way that months ago one couldn't avoid articles promoting the wonders of converting to a Roth IRA, lately one can't open a personal finance magazine or browse the Web without coming across an article promoting ETFs.

There's this rather unfocused one in the New York Times.

And this one in Kiplinger.

I don't find any of the arguments persuasive (except perhaps the lower fees, but my Vanguard mutual fund expenses are already quite low). And warning bells go off when I read about how "you can bubble-proof the core of your portfolio" with ETFs. Am I alone in my reaction?
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Old 07-19-2010, 09:56 PM   #2
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I have the same reaction. The journalists are not writing about the benefits of broad-based index ETFs. The NYTimes article you linked has this:
Quote:
These funds are also so specific that they allow people to invest in particular niches.
which while true, ignores the most actively traded ETFs like SPY, IWM and EEM, as well as the low expense ratio ones like VTI, VBR, VB, VEU, etc.

You could have a great portfolio with VTI, VBR, VEU, VSS, VNQ, and BND --- all ETFs from Vanguard. But these are all boring, run-of-the-mill ETFs with absolutely nothing exotic. They all have regular mutual funds associated with them, so no particularly special advantages over the funds themselves.

Part of the hoopla has been that brokers offer free trades in ETFs: Wells Fargo for all ETFs, Schwab for its ETFs, Fidelity for some iShare ETFs, and Vanguard for its ETFs.
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Old 07-20-2010, 12:16 AM   #3
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The ETF concept has been a huge, blockbuster success, to the point that some people are asking things like, "Will ETFs do away with mutual funds?"

I'd like to think ETFs are so popular because their fees are so low, but I have a feeling it's because you can trade them all day and short them.
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Old 07-20-2010, 05:12 AM   #4
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Originally Posted by Onward View Post
I'd like to think ETFs are so popular because their fees are so low, but I have a feeling it's because you can trade them all day and short them.
I agree. They were, after all, created by Master Marketers. To every season; churn, churn churn.
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Old 07-20-2010, 08:12 AM   #5
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So don't trade them.
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Old 07-20-2010, 12:36 PM   #6
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Originally Posted by wishin&hopin View Post
And warning bells go off when I read about how "you can bubble-proof the core of your portfolio"
I'll have to have a talk with Knight Kiplinger about his writers' mixing metaphors!
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