Paul Farrell’s article in the Wall Street Journal suggests that no-load index funds are better than ETFs in a lazy portfolio (also available at MarketWatch.com). His main arguments against ETFs are broker’s commissions and the superior performance of Vanguard funds over their respective ETFs. While, index funds are a great choice for many investors, there are definite advantages to ETFs. The performance superiority of index funds is also questionable.
Bottom line: Asset-allocation and periodic rebalancing are the keys to superior portfolio results for most investors. Index mutual funds are a good choice for some (e.g. someone investing small amounts of money periodically) and ETFs for others (e.g. foreign investors like me!) to achieve that goal.
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1 response so far ↓
1 JLP // Feb 7, 2005 at 12:09 am
William Bernstein says the same thing against ETFs on his website (http://www.efficientfrontier.com/ef/901/shootout.htm).
I’m going to have to investigate this further.
JLP
http://AllThingsFinancial.blogspot.com
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