If you have been a regular reader of some of our other websites, you know by now that we are very much in favor of ETF’s. They are not perfect but we do think that they are superior to mutual funds as you can read about here. The basic arguments are that:
-ETF’s end up being much cheaper to use over the long run than individual stocks or mutual funds
-Using ETF’s help you be more tax effective
-You will avoid excessive trading fees by using rebalancing rules
-ETF portfolios can help you get the exposure that you want in almost all cases
We had also written about ways mutual funds were superior to ETF’s but that applies mostly to investors that have lesser assets and who would probably not even be targets as we described in “Who is BuildYourETFPortfolio for“. The same applies for the very rich (tens of millions $) who will often benefit from buying the stock directly.
However, for the vast majority of us, building a long term portfolio with ETF’s is the way to go. Funds have been flying towards ETF’s and it’s no surprise. They save over 1% every year on fees alone compared to similar mutual funds which ends up making a very significant difference in your retirement.