Quote:
Originally Posted by Descant
I think Ishoot308 was the first poster to actually answer the question from pjard, and give a local name and recommendation. Well Done.
For those who love Vanguard, they have their place. But if I pay them 0.4% fee, every year or I buy an index ETF for a one time charge of $4.95 which is better? Take 10 years, $10,000 x 0.004 is $40 x 10=$400 management fee. The ETF cost me $4.95, once. If it's $1,000,000 that's $40,000 vs $4.95 over ten years.
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Your numbers are off in two or three ways. First, the Vanguard expense ratio is more .04%, but this is fund-dependent. Second, the ETF expenses you quote are the transaction fees, which are zero for most mutual funds. Every ETF will also have an expense ratio similar to a mutual fund, say .04%. Third, the $4.95 does not include the bid-ask spread on the ETF. In other words, at any given moment, you need to pay more to buy shares than you would receive if you tried to sell them.
ETFs are good if you're interested in more trading flexibility than a mutual fund allows, but you pay for the privilege. Apples to apples, an ETF will always be more expensive than a similar mutual fund.