I’m often asked to recommend a simple index fund portfolio for people who are just getting started with passive investing and want to learn the basics. There are several good portfolios you can build to suit your needs using a few funds that require little maintenance. Balanced index funds are also a good option for people who don’t want to do any maintenance.
Exchange-traded funds (ETFs) are mutual funds that trade on a stock exchange. For many years, all ETFs were index tracking products. The first ETF to not follow an index was launched in 2008. Today, there are 60 actively-managed ETFs listed in the U.S. and many more pending. To avoid confusion, I propose referring to index products as ETIFs and active products as ETAFs.
Exchange-traded funds (ETFs) reached a record $191 billion in new inflows last year and their popularity is continuing this year. There was $28.6 billion of inflow in January, resulting in the strongest consecutive two-month period ever.
I listened to a well-known financial adviser glorify exchange-traded funds (ETFs) while speaking at the 2013 Inside ETF conference last week. This particular speaker’s take on ETFs was that they are a godsend for his clients. He switched to ETFs in 2006 because these index-tracking products have lower expense ratios than the traditional mutual funds that try unsuccessfully to beat the market. Not only was he saving his clients money, the index-tracking ETFs performed better as well, he said.
The fund industry is notorious for comparing the performance of their products to the wrong benchmarks and even made-up benchmarks. This is done to make a fund’s performance appear to be superior relative to something — even if that something makes no sense. This decadent practice harms the credibility of an industry that has lost so much in recent years.