Switching from Index Funds to ETF's

[Craig]

For those who have significant experience and investments in ETF's ... is it a good strategy to DCA into index funds over a period of time (say, a year), and then occasionally to swap into a comparable ETF? I understand the commissions will eat up the expense ratio savings in a DCA situation, but those low expenses seem to make ETF's an obvious preference over index funds with the same investment mix.

Thanks.

 

[JPatrick]

It probably is all about performance.  If the ETF has a dynamite record compared to the index then I'd switch.  If you feel a need to be able to bail out real quick then the ETF is better.  Of course you need to consider costs, but I'm thinking if this is long term and your index performance is OK, let it ride.
For awhile this summer I held Fido's energy fund FSENX and their energy service fund FSESX.  I switched most of that into the corresponding ETF's OIH and XLE solely to be able to write calls for added income.  But, aside from that, if you compare the charts you'll find almost identical performance.

 

[wabmester]

Charles, can you give an example of the funds and ETFs you're think about? Most index funds should have ERs pretty close to those of equivalent ETFs.

 

[Dry Socks]

Is this DCA going into a retirement account ?

If not, you'd likely end up with lots of short term gains with that strategy.

 

[Shredder]

I currently do not have any ETF's, but have mostly index funds at Vanguard. However one advantage I see is being able to set stop losses on a ETF, that you can't on a fund. Might help in a meltdown.....Shredder

 

[Repairmanjack]

Be sure to compare the expense ratio of the ETF with the comparable index fund. The ETF will not always have a lower expense ratio.

http://news.morningstar.com/doc/article/0,,145714,00.html?fsection=Comm4&t1=1129645241