home sp

Index ETFs vs. Mutual Funds

According to Investopedia, about 80% of mutual funds fail to outperform the S&P 500. So why take an 80% risk of underperforming the stock market with mutual funds when there are index ETFs, like the SPY, that track the S&P 500? The choice seems pretty clear! An S&P 500 ETF like the SPY is very easy to invest in and should outperform most mutual funds. Please note that index ETF's do have a small expense fee which will cause an index ETF like the SPY to slightly underperform the S&P 500. But the trading costs associated with creating the S&P 500 in your own portfolio would be far greater then the SPY's expense ratio. With this small fee an S&P 500 ETF should still outperform most mutual funds due to the already high percentage of mutual funds that can't beat the S&P 500.

Not only do index ETFs outperform most mutual funds, but they also have lower expenses ratios. Through our research, we found that on average mutual fund expense ratios are about 3 times more then the average Index ETF expense ratio. CNN Money claims that the average mutual fund expense is 1.35% and the average ETF expense is 0.41%. If index ETF performance alone isn't enough to convince you, hopefully the lower expense ratio of ETFs will. Also remember that expenses are usually not included in a funds reported performance.

Although index ETFs, like the SPY, perform much better then most mutual funds, the Market Flavor sample stock portfolio has greatly outperformed the S&P 500. We utilize quality stocks with good valuations and high growth potential to create a winning stock portfolio. Along with those top notch stocks we use different ETFs to give us access to strong industries and foreign countries. Give our simple online investment service a try!


Read more about the SPY index ETF at Yahoo Finance.

Below we have constructed a list of ETF's that are commonly used to invest in different indexes, industries, countries, bonds, and commodities.

Most Popular ETFs list
Nasdaq 100 ETF - QQQQ
Dow Jones ETF - DIA
Short Term Treasury Bond ETF - SHY
Short Term Bond ETF - BSV
Aggregate Bond ETF - AGG, LAG
Intermediate Term Bond ETF - BIV
Long Term Bond ETF - BLV
Energy ETF -XLE, VDE
Crude Oil ETF - USO
Gold ETF - GLD, IAU
China ETF - FXI
Europe ETF - VGK
Emerging Markets ETF - EEM, VWO
Latin America 40 ETF - ILF
India Fund - IIF
Canada ETF - EWC
Financial ETF - XLF, VFH
Russle 2000 Growth ETF - IWO
Natural Gas ETF - UNG
Brazil ETF - EWZ
REIT ETF - VNQ

Here is an article by fool.com that goes into more detail about how ETFs and Mutual Funds work.

Tags:    

TrackBack

TrackBack URL for this entry: nbsp; http://www.marketflavor.com/cgi-bin/mt/mt-tb.cgi/174


Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)


Complimentary Free Trial

Sign up for a free trial of our successful online stock market advice.
Free Trial Offer

Market Flavor Blog

This blog is brought to you by the successful Market Flavor portfolio. Read more about our simple online investment advice!



Subscribe to This Blog


 Subscribe in a reader


Subscribe by email.
Enter your email address:




Recent Posts


Bear Market Investment Strategy - The Bear Stearns Bailout
Stock Market Performance in 2007 - The S&P 500 vs. The Market Flavor Portfolio
Best Investments for 2008 Q1
Kiva Org - Supporting Poverty Reduction through Economic Growth
Index ETFs vs. Mutual Funds
Stock Portfolio Performance in November
Where to Invest in 2008 for the First Quarter
How to Invest in the US Currency Decline
Model Stock Portfolio
Recession 2007 - Wait to Invest until Early 2008 or Later


Jump to Sections


Complimentary Free Trial

Sign up for a free trial of our successful online stock market advice.
Free Trial Offer

Home | Stock Picks | Free Trial | Quick Tips Mailing List | Contact Us

Web Design by Dotgarden

Powered by MovableType