Originally posted by: Dissipate
Originally posted by: blackangst1
ETF's are not the be all and end all of investments. There are reasons I dont like them. Im not saying theyre bad investments-they arent. Just not for me. Here's why:
ETF's are exchange traded and subject to a broker's fee or commisions. This is especially troublesome for the average investor who may make 6-12 purchases throughout the year. Mutual funds are not. If there is a back end load on the fund there will be, but there arent alot of those around.
Simple solution for this. Suppose you open a Vanguard Roth IRA fund account. You save up at least $3,000 and then buy their Vanguard index fund(s). Then, each month you contribute to these funds with no trading fees. Once your Vanguard fund(s) are well over $3,000 in value, you then open a Vanguard Roth IRA brokerage account, which will essentially be added to your fund account. For each fund well over $3,000, you sell off your shares until you are back down to the $3,000. You then buy into the equivalent ETFs, for instance IVV for the iShares S&P 500 ETF. Since you still have the minimum $3,000 in each of your vanguard funds you can continue to contribute without paying brokerage fees, but now the bulk of your investments are in the much cheaper equivalent ETFs.
Too fucking complicated. I'll stick with my DCA and 28% average since 1989 thanks though.
ETF's can be shorted and bought on margin, which *can* influence the fund negatively.
Most of the major ETFs out there will not stray very far from their NAV or Net Asset Value. The reason why is because of arbitrage. Financial firms can buy up the underlying assets and exchange them for shares of the ETF, and vice versa. Therefore, any time the ETF gets too far away from it's NAV, there is a big opportunity for arbitrage. If you know anything about markets, such opportunities don't last very long, if they come up at all.
OK
The average joe cant buy directly from the ETF itself and must go through a broker. The same average joe can call up Vangaurd, AIM, Fidelity, etc and start investing with $25.00.
See above. You can have both a fund account and a brokerage account at the same time. You get the benefit of avoiding trading fees with the low expense ratios of ETFs.
The average joe isnt going to do what you've outlined above. Too complicated. Shit...for alot of my clients just the basics of what a mutual fund IS was complicated.
ETF's have a bid-ask spread. Mutual funds dont.
Bid ask spread is nothing compared to how much you will pay in the much higher expense ratios of mutual funds.
Not necessarily.
ETF's dont allow divident reinvestment. Mutual funds do.
You have to pay taxes on the dividends whether they are reinvested or not, so that doesn't matter much.
Not necessarily. Also, WHEN they're taxed is a factor also. I would rather reinvest and let it compound for another 25 years than tax it now.
ETF's cannot trade on futures which is a great market. Mutual funds can.
Shows that you know nothing about ETFs. There are ETFs based on futures:
Text
OK. A few issues I have, from the same site you listed above:
*Commodity ETNs (exchange traded notes) are non-interest paying debt instruments whose price fluctuates (by contractual commitment) with an underlying commodities index. Because they are debt obligations, ETNs are subject to the solvency of the issuer.* Uh no thanks.
*Commodities-related ETFs generally track the producers of commodities, such as mining companies. While the financial performance of those companies -- and thus their stocks -- may be highly leveraged to the underlying commodity, other factors can impact the profitability of production. The ETFs, therefore, may not reflect the performance of the underlying commodity uh no thanks Might as well trade on margin with the real thing. Much simpler.
ETF's cannot be bought in odd lots. Mutual funds can.
Why the hell would I care about a 'lot' when I can buy an individual share of an ETF if I want to? If you can buy 1 share and any number of shares for that matter, you don't care about 'lots.' More evidence that you don't know about ETFs.
do you understand lot pricing? If I want to invest $200, I couldnt do so unless buy price was exactly divisible by $200. thats what I mean by lot pricing. It's a big deal, and goes back to the PITA factor.
So please stop your fanboi lectures. Thanks.
Yeah, I'm a 'fanboi' because I actually do research and try to find the best value for my investment dollars, whereas you know nothing about that which you disparage. :roll:
No, youre a fanboi because instead of a reasonable argument like mine (they arent for everyone) you automatically say Im getting robbed, etc etc etc and dont know ANYTHING about my financial profile. As I've said before, Im not saying theyre bad, they just arent for everyone. Including me for the reasons Ive stated. Which are very valid BTW.