Mutual funds VS ETFs

[Birchwood]

From your experiences what are the subtle advantages and disadvantages of each?

 

[LOL!]

All explained right here -> ETFs vs mutual funds - Bogleheads

The main issue that I see is that many folks have severe anxiety issues in setting limit prices for their ETF transactions. With mutual funds, one is guaranteed a fair price on every order. Not so with ETFs unless one thinks a little bit.

Or more subtly, one cannot take advantage of the person on the other side of a trade with a mutual fund, but sometimes one can take advantage of the person on the other side of a trade with an ETF. That's why I like ETFs an awful lot, though I think both have a place in one's portfolio.

 

[RonBoyd]

See also: Wild Trading Exposed Flaws in ETFs - WSJ

 

[jerome len]

I like ETF and mututal funds....use both. I'm an index person, like the low cost of ETF funds, their flexibility and greater availability. Now I buy a little stock each month, buy a little extra when the market dips a couple of percent and ONLY buy what I don't intend on selling for years to come UNLESS the market changes in a way unknown to anyone today.

So.....lately I set up an ETF buy, price it 2.% below current price, leave the option open for a week or two and if I get it , fine, it not no loss. If I did the same with a mutual fund I would get market closing price, not my price. I think I've made significant money the past couple of months doing this. It is work, however, I enjoy it and do it.

On the other hand, when the market is dropping you could take a significant loss by selling at market. you HAVE to put in a minimum price so that doesn't happen to you. If you don't want to do this, don't use ETF funds.

Oh yes, I like Schawb and Vanguard high yielding dividend ETF funds. I'm earning over 2.5% tax advantaged money and they are much better than CD rates. EFT dividend funds offer many good choices......I'm buying them on every dip!

 

[LOL!]

So.....lately I set up an ETF buy, price it 2.% below current price, leave the [-]option[/-][buy limit order] open for a week or two and if I get it , fine, it not no loss.
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Oh yes, I like Schawb and Vanguard high yielding dividend ETF funds. I'm earning over 2.5% tax advantaged money and they are much better than CD rates. EFT dividend funds offer many good choices......I'm buying them on every dip!

If you have a limit order in place, do you not have to have the cash available to buy those shares in your brokerage account or somewhere? That money is not earning over 2.5% tax-advantaged money -- unless you have some spectacular cash sweep account available. Or maybe you are doing something else?

 

[jerome len]

If you have a limit order in place, do you not have to have the cash available to buy those shares in your brokerage account or somewhere? That money is not earning over 2.5% tax-advantaged money -- unless you have some spectacular cash sweep account available. Or maybe you are doing something else?

Yup......I have money in a short term bond fund......I pay for my EFT buys the same way I do mutual fund buys. I'm looking for investment growth along with dividends ........so, over the long term my return should be much higher than just the tax enhanced dividends.

 

[growing_older]

If you have a limit order in place, do you not have to have the cash available to buy those shares in your brokerage account or somewhere? That money is not earning over 2.5% tax-advantaged money -- unless you have some spectacular cash sweep account available.

The 2% price advantage on the buy is 2% absolute. Supposing it takes a week to fill, that's a 2% in a week.

The 2.5% you mention earning on cash is an annual rate. That is 2.5% per year.

I can afford to keep money earning nothing at all if it's going to get me a 2% per week benefit.

 

[hnzw_rui]

So.....lately I set up an ETF buy, price it 2.% below current price, leave the option open for a week or two and if I get it , fine, it not no loss. If I did the same with a mutual fund I would get market closing price, not my price. I think I've made significant money the past couple of months doing this. It is work, however, I enjoy it and do it.

That's actually a pretty good strategy. I've recently switched my 457 to ETFs so all new payroll contributions go into a sweep account anyway (plan administrators eliminated index fund only options in the core plan so ER went up by around 0.5% on average). So far, I've just done market orders every couple months or so but I think setting a limit order at 1-2% below market is a better way to go. If I can boost returns a wee bit with some minor dirty market timing, why not?

 

[LOL!]

The 2% price advantage on the buy is 2% absolute. Supposing it takes a week to fill, that's a 2% in a week.

The 2.5% you mention earning on cash is an annual rate. That is 2.5% per year.

I can afford to keep money earning nothing at all if it's going to get me a 2% per week benefit.

Right! What's not to like about a 2% every week for 104% a year!

Of course, money earning nothing is not going to get you a 2% per week benefit.

 

[hnzw_rui]

Right! What's not to like about a 2% every week for 104% a year!

Of course, money earning nothing is not going to get you a 2% per week benefit.

Not quite 104% a year unless you do "week trading" on your entire portfolio.

 

[mathjak107]

etf bond funds can be a very volatile compared to the under lying assets unlike etf stock funds .

etf bond funds can be a lot more volatile because you can short them , have stop losses and they trade at times at pretty big premiums and discounts .


the fidelity total bond fund ftbfx is identical to the etf version fbnd .

but the ups and downs of the etf can run 2x the regular fund .

the other day the etf was down .75 while the fund was only down .38%

quite frequently you will see wide spreads between the etf bond fund and the open ended version if available .

for fun watch the two fidelity total bond funds daily or watch fcor vs fidelity corporate bond fund , also the same exact fund .

 

[LOL!]

I agree that bond ETFs may have liquidity issues as noted by folks like Rick Ferri and others. I see the main issue is that when one wants to rebalance from bonds to equities on a day that equities have reallly tanked, then it is possible that one will not get a fair price (close to the NAV) for the bond ETF, but one would get a fair price for the bond mutual fund since its NAV is determined after the market close.

The Fidelity bond ETF FBND is -- in my opinion -- not an ETF to ever consider owning since the average daily volume is ridiculously low to begin with. FBND looks to be more an experiment for Fidelity and not a serious effort.

 

[mathjak107]

even bnd vs the vanguard open ended total bond fund has decent spreads at times .

yesterday saw a .09 return on vbtlx vs only .02 on bnd . at times the spread has been even greater percentage wise .

buying a bond etf at a premium and selling at a discount can widen things as well as the spreads .