Why I Prefer Index Funds | ETF vs Index Fund

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Are you trying to figure out which investment option is better for you, an ETF or an index fund? In this video I break down the differences between these two types of investments and explain why I personally prefer index funds over ETFs.
Timecodes:
0:00 - Intro
0:33 - Index Fund 101
1:54 - Higher Diversification
2:28 - Low Operating Cost
3:32 - No Need to Hire an Investment Manager
4:30 - Net Asset Value
5:10 - ETF 101
6:44 - Why I Prefer Index Fund
7:08 - No Need For Bells & Whistles
7:34 - No Automatic Investment
9:08 - Minimum
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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed.

Опубликовано:

15 июл 2024

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Комментарии : 530

@alexsteven.m6414 21 день назад

I have been a dividend focused investor for a long time. This does not mean I don't own growth stocks, I do. A well rounded portfolio should be a mixture of both categories. One way to minimize the anxiety out of stock market investing, is to make sure you keep a large cash cushion. I invest in the market, but never put all my money in market.

@valeriepierre9778 21 день назад

Dividends are dope. Personally, I sometimes use my dividends to buy other dividend and growth stocks for diversification instead of reinvesting in the same stock. To each their own methods though. The good thing is that you’re investing in the first place and that’s what’s important.

@bernisejedeon5888 21 день назад

I agree. Based on personal experience working with an investment advisor, I currently have $1m in a well-diversified portfolio that has experienced exponential growth. It's not only about having money to invest in stocks, but you also need to be knowledgeable, persistent, and have strong hands to back it up.

@belobelonce35 21 день назад

How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.

@bernisejedeon5888 21 день назад

Sharon Marissa Wolfe is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

@edelineguillet2121 21 день назад

Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.

@ChristopherAbelman 2 месяца назад

The whole talk about "reverse" market crash (real estate and stock market) basically argues that we are nowhere near done with inflation and that we might actually experience "hyperinflation" in the near future combined with accelerating poverty levels across the nation or going thru a historical economic depression...those are the extreme conditions that have produced the reverse market crashes in most examples I've seen. I personally don't see anything that extreme coming, but who knows?

@PennyBergeron-os4ch 2 месяца назад

Focus on two important objectives. First, stay protected by learning when to sell stocks to cut losses and capture profits. Second, prepare to profit when the market turns around.I recommend you seek the guidance a broker or financial advisor.

@FinnBraylon 2 месяца назад

Stocks are unstable at the moment, but if you do the right math, you should be just fine. Strategists have been aiding folks in recording gains over 250k just in a matter of months, so I think there are alot of wealth transfer in this downtime if you have someone who knows where to look like i do.

@HildaBennet 2 месяца назад

Hello, how did you handle it? I believe I require a pro after reading these comments

@FinnBraylon 2 месяца назад

SONYA LEE MITCHELL is the manager I use. Just research the name. You'd find necessary details to set up a consultation.

@FinnBraylon 2 месяца назад

SONYA LEE MITCHELL is the manager I use. Just research the name. You'd find necessary details to set up an appointment.

@TheJackCain-84 Месяц назад

This is my fifth year after retirement. I’e been following the 4% rule thing I saw on a youTube channel, but this isn’t really how hard I expected things to be. After I cashed out a lump sum, I still have about $760k left, but at this rate, and with how the market is (we were putting money away in an index fund), I’m starting to get really worried.

@Jamessmith-12 Месяц назад

Not a lot of people are able to save that much in a lifetime. But now you are retired and depend on your investment, it’s best you redistribute your capital. To simplify the process, you could allocate your resources with the help of a financial advisor.

@JacquelinePerrira Месяц назад

I’m closing in on retirement, too, and I have benefitted so much from using a financial advisor. I didn’t start early, so I knew the compound interest of index fund investing would not work for me. Funny how I pulled in more profit than some of my peers who had been investing for many years.

@kevinmarten Месяц назад

I really need help, please. Can I ask who the financial advisor you work with is?

@JacquelinePerrira Месяц назад

When ‘Carol Vivian Constable’ is trading, there's no nonsense and no excuses. She wins the trade and you win. Take the loss, I promise she'll take one with you.

@kevinmarten Месяц назад

She appears to be well-educated and well-read. I ran a Google search for her name and came across her website; thank you for sharing.

@zdog1566 Год назад

If an ETF and index fund are exactly the same, such as vti and vtsax, I would recommend the etf for tax efficiency. Look at what happened with the vanguard targeted date mutual funds--they distributed huge capital gains because of all the money moving to admiral. Anyone holding those index funds in taxable got hosed. Etf is tax efficient and doesn't distribute those gains. I'm surprised you didn't mention this very important point

@Davek111 Год назад

In addition to the tax efficiency, the ETFs allow for early retirees to have greater control over reportable income so they can qualify for heavily subsidized ACA health insurance prior to Medicare.

@ds94703 11 месяцев назад

Anyone who has been hit by capital gains at the end of the year, would recommend an actively managed tax efficient ETF and not a mutual fund. Mutual fund will pass all the capital gains to you at the end of the year. Of course once the distribution is done you are then liable for taxes - meanwhile the NAV of the mutual fund drops by the same amount of the distribution, thus are not tax efficient. ETF's dont have this problem, especially if they sell and use some slick ways to avoid wash sales. ETFs can ALSO be used to avoid the wash sale rule while maintaining a similar investment holding. This is because ETFs typically are an index for a sector or other group of stocks and are not substantially identical to a single stock.

@grigorirasputin425 9 месяцев назад

He is clueless

@elliottharris9015 9 месяцев назад

@@Davek111 Really? Could you explain more?

@halcyonity 6 месяцев назад

VTI and VTSAX have the same tax efficiency due to a patent by vanguard. If however you are comparing non-Vanguard ETFs and MF which track the same index, the ETF will have slightly better tax efficiency if held in a taxable account. The vanguard target date funds are an actively managed basket of index funds (i.e., the fund manager decides what ratios of US vs International equities, us vs international bonds, cash positions and the ratio of all those asset classes. They are two fundamentally different things.

@Gorrilla_diesel Год назад

I use ETF's in my ISA and index funds in my SIPP but I swear by them both great content thank you.

@YTDataAnalyst 5 месяцев назад

Hi Hunan Train, your profit margin is quite inspiring and stunning for a starter; do you make use of spreadsheet, what is your top holding

@ecgodsmack86 2 месяца назад

Is SIPP only for UK residents?

@AaliyahKhalid-kq9gl 2 месяца назад

The fin-Market;s have underperformed the U.S. economy as fear of inflation hammers the prices of stock;s and bonds. My portfoliio of $750k is down to $592k any recommendation;s to scale up my return;s during this crash will be highly appreciated.

@RichieAnnabel 2 месяца назад

The market is volatile at this time, hence i will suggest you get yourself a financial-advisor that can provide you with entry and exit points on the shares/ETF you focus on.

@PHILIPTURNEL 2 месяца назад

Yes, I've been in constant touch with a Financial Analyst for approximately 8 months.

@ElvisMarshall-xo2lw 2 месяца назад

How can one find a verifiable financial planner?

@RichieAnnabel 2 месяца назад

I use Svetlana Sarkisian Chowdhury. You probably must have heard of her.

@KennyMichael-id1bb 2 месяца назад

Thanks for sharing.

@genep.6008 Год назад

I'm a life-long investor, and I am heavily invested in VOO. That is an ETF SP500 Index fund. Yes it's an ETF, with a bid/ask, can trade intraday, benchmarks the S&P500, very low cost expense ratio, and is non-actively managed. So I would have to say this ETF is an awesome index fund, with an expense ratio of 0.02! Beat that!

@muffemod Год назад

They are both index funds yo.

@NickR.. Год назад

@@Chris-fd4kh Fidelity's FXAIX is .015%

@peskyzebra Год назад

I have IVV in mine, was deciding between that and VOO.

@BucketListEscape Год назад

I have 50 percent of my portfolio in VOO

@joec361 11 месяцев назад

I'm a new investor, what do you think about buying equal distribution of both VOO and SCHD etf or VGT and SCHD combination? Your input would be greatly appreciated.

@poolking25 5 месяцев назад

Two updates/corrections: 1) you can automate ETF purchases with fidelity. They allow fractional shares and you can purchase VTI or VOO weekly, monthly, etc. 2) you can buy fractional shares of ETFs with Vanguard

@luckydoodle_story 3 месяца назад

This needs to go higher. Fidelity also allows you to purchase fractional ETFs.

@Roger-pw3zz 2 месяца назад

While you can purchase fractional ETF shares using vanguard, it must be placed as a market order.

@GSgurusarath1 3 дня назад

Most underrated comment !

@blusquirrel Год назад

I share your views. But an ETF which pays a dividend can be great, especially in a bear market such as this.

@aguilarkristine7022 Год назад

@@Thompson7888 Most of the experts here on YT and lg copy him. That is how they make enormous profits from the seemingly unknown market.

@amymansfield8184 Год назад

@@aguilarkristine7022 Lol. I am one of them... Started last year wish I had known about him earlier.

@blusquirrel Год назад

@@sonyablack2015 In reality its the best period to invest. Hang in there. Just be cautious and have a system

@toyko7200 Год назад

Let me guess, you didn't research the companies properly before investing...Serves you right.

@lebronj5491 Год назад

It's the market, if you can't be on it on the bad days, you shouldn't be in it at all,

@MasterpieceFinance Год назад

I love Index Funds & ETF's myself! Index funds for my retirement accounts, ETF's for my regular brokerage accounts. Great video Tae!

@nicholaslacey5861 2 дня назад

I was wondering that to whether to go with index funds for a Roth ira and etfs for taxable brokerage?Since I heard that etfs are more tax efficient or something like that?

@richardhead2318 Год назад

I think you mean to contrast ETFs and mutual funds. Both mutual funds and ETFs include index funds and active funds. The main difference between ETFs and mutual funds is how they are traded.

@OptimizedPortfolio Год назад

Indeed. The uploader seems to have conflated "mutual fund" and "index fund," either incidentally or purposely. Strange.

@joaovitorgerdullitamanini5340 Год назад

Yes. Definitely wrong

@ConsumeristScroffa Год назад

Exactly. Hard to trust anyone's opinion if they get something so basic wrong.

@bm3830 Год назад

Bingo.

@barry3792 Год назад

yep, scratching my head after watching this video

@Bleys0072 Год назад

Amazing how someone can speak as much on this while conflating index fund with mutual fund. The choice is ETF vs Mutual Fund, with either one typically holding an index within it for a passive investor.

@OptimizedPortfolio Год назад

Indeed. Not sure what happened here. If it was accidental, I don't see how that's possible. If it was on purpose, I don't see why someone would do that. Either case is strange.

@Bleys0072 Год назад

@@OptimizedPortfolio Not sure if this was intended as a plug, since you're replying on your channel's account, but I'm glad you did. Best of 2022 is a good video. Nicely done; others should check it out.

@OptimizedPortfolio Год назад

@@Bleys0072 Thanks!

@andrewgeissinger5242 8 месяцев назад

You are correct. But I have noticed other RU-vid videos doing the same as this presenter, so for some reason this goofy use of terminology has caught on in certain circles. It's not just a problem with this particular presenter.

@lailaalfaddil7389 Год назад

The most important thing that should be on everyone's mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies.

@susannnico Год назад

How can this person, ROCHELLE DUNGCA-SCHREIBER be reached please...

@susannnico Год назад

Wow! I just looked up this person out of curiosity and I'm super impressed with her qualifications. Thanks for sharing.

@Mr35000000 Год назад

She lost me a fortune😂

@doomshallot4203 Год назад

You can have both. I buy VT, which is both an ETF and an Index fund. Nothing wrong with ETF's in my opinion. Actively managed funds are what I avoid.

@harveydanger398 Год назад

^^^^this is the way. Super misleading video. Buy ETFs that track indexes across various areas of the market (large cap, small cap, international developed, international emerging, etc.) Don’t throw money away on high expense ratios.

@user-tb7to6ex9s 4 месяца назад

Glad I found your channel. You explain issues pro//con very well. Appreciate you do not “talk” down to contrasting ideas. Thank You.

@user-ji6bk4vc5i 4 месяца назад

This was the best in depth explanation of differences between mutual funds and ETFs.

@knowthyself690 6 месяцев назад

Dude...I simply did not know this nuance between the two. Thanks a million. I am devising a model for parents to invest for their newborns and was all in on ETFs. Now I can do some math with this new knowledge.

@dresden3913 4 месяца назад

I’ve watched two of your videos so far and all I’ve got to say is. You’ve gained a follower and you are an amazing financial RU-vidr. Love the videos love the openness of opinions and facts while also respecting others views on their stratigies.

@bonanzatime 7 месяцев назад

This was the best in depth explanation of differences between mutual funds and ETFs.👍👍

@modernfinancialplanning Год назад

Some index mutual funds pay year end capital gain distributions meaning that you could incur a capital gain even if you didn't sell the mutual fund which makes it slightly more advantageous to hold ETF's in taxable accounts. ETF's typically don't have year end capital gain distributions because of the way they are structured.

@Davek111 Год назад

100% correct! this allows for tax efficiency, and provides early retirees to have greater control over reportable income so they can qualify for heavily subsidized ACA health insurance prior to Medicare.

@JaredJohnsonRocketMan Год назад

You still have to pay taxes for dividends for ETFs.

@modernfinancialplanning Год назад

@@JaredJohnsonRocketMan Yep! No structure will shield a taxable account from taxes on dividends. I was just saying that for tax planning ETFs can be more advantageous because they are less susceptible to year end capital gain distributions.

@thomaschew2191 Год назад

You have convinced me to cough up the $3K to buy VTSAX. Now on my to-do list for the end of the first quarter 2023 Thank you!

@Bonez1999 Год назад

I combine index fund + ETF's for the best of both worlds: I keep around $5k in the index/mutual fund versions of investments (VTSAX/VTIAX, etc), and then when I have $15-$20k in the mutual funds I perform a tax-free conversion to the ETF counterpart for the lower expense ratios. This allows me to buy the funds at NAV and set up recurring investments without having to actually 'buy' ETF's and cross the bid-ask spread. The majority of my investments are in ETF's after I perform periodic conversions.

@josephcavelli5739 Год назад

How do you perform the conversion? Which platform do you use to do so? Any information will be appreciated.

@Bonez1999 Год назад

@@josephcavelli5739 I invest with Vanguard. Just call and say you'd like to convert xxx # of mutual fund shares to the ETF counterpart. That's it.

@harjimbaugh4234 Год назад

unless you have several millions of dollars in those investments those fractions of a percent .01 vs .02 are essentially 'a few dollars'

@barry3792 Год назад

.....uh....what?

@Bonez1999 Год назад

@@harjimbaugh4234 Not so much in the basis points, of which my international etf is .04 less bips FYI, but more in not dealing with the bid/ask spreads of buying and selling ETFs. Those 2 things add up over time if you understand compounding interest.....

@IVRollemberg8608 Год назад

Insightful video. I just want to know best how people split their pay, how much of it goes into savings, spendings or investments. I'm 33, and earn nothing less $150k per year, but nothing to show for it yet

@AmFaucher255 Год назад

@Elena Castro Right, you can avoid the pitfalls associated with lifestyle inflation by consulting a well grounded advisor, to help plan your short- and long-term goals, it all depends on proper guidance. I've watched my income generate wealth over the past 2 years and 6 months, I now own a house fully paid, and with at least $2.2m sitting in solid assets thus far. All of this is a result of subsequent investments, and following expert advise.

@waltermartinelli8384 Год назад

@@AmFaucher255 Nice, who is the FA aiding you if this is not much i'm asking? my retirement plans are going down the drain with my 401k particularly losing everything it gained ever since 2019

@AmFaucher255 Год назад

@@waltermartinelli8384 Her name is BRIANNA MCKEE HARRIS, can’t divulge much. Most likely, the internet should have her basic info, you can research if you like

@waltermartinelli8384 Год назад

@@AmFaucher255 Thanks, I just googled her and I'm really impressed with her credntials; I reached out to her since I need all the assistance I can get.

@RadimSafran Год назад

In your situation you should invest 400$ every week minimum imo. (I calculate 1h = (80$*10)/2 = 400$

@davidmclifton1 Год назад

Index Funds in retirement accounts, ETFs in taxable brokerage.

@markwiderberg4136 6 месяцев назад

Simply said Thank you for always do a great job!

@doug2731 Год назад

I started off with VTI and VXUS (ETFs) a couple years ago. I like being able to buy at any time with a few button presses on my phone. The holdings and costs are the exact same as VTSAX and VTIAX. And it's easier for new investors to start with ETFs because there isn't a $3,000 minimum requirement.

@Profitglutton90 Год назад

Yup that’s why I started with ETFs as well. It’s has the flexibility I need for what I want without annoying minimum costs.

@barry3792 Год назад

Yeah, what I got from this video was really nothing to convince me to go with mutual funds. Fractional ETF shares of VTI, for example, is possible. It was a very weak argument

@Sk8brdZepp13 7 месяцев назад

extremely well explained and excellent video. thank you!

@9819015 Год назад

So informative! Thank you.

@automat8 11 месяцев назад

Thank you for your counsel.

@robb7733 7 месяцев назад

Outstanding video! 1 of the reasons I prefer ETF's is simply that I can sell all of my holdings in the event of an emerging black swan event. If I held a mutual fund, I would be forced to watch the entire fund value melt away all day until my sale was executed that night. I understand that selling really isn't part of the whole buy and hold strategy but I am a guy who lived through the internet collapse, the 2007-08 crash and the covid crash and it takes a lot of time to recover. I'd prefer to be able to sell and protect myself if I'm fortunate enough to see it coming before major damage is done. JMHO.

@matthewhubbard7177 6 месяцев назад

Internet collapse, 2008 crash, and covid crash would have been great times to buy more index funds. I sure wish I had cash on hand to snatch up more on each of those occasions - or even at the market peak the day before each of those dips!

@TonyCox1351 6 месяцев назад

In 2008 biggest the S&P500 dropped in a single day is 10%. So are you saying you liquidate all your index funds when it gets close to 10%? Seems like a crazy investing strategy

@kxjx 4 месяца назад

They is no way you can do that. If you try you risk selling the bottom. And even if you avoid selling the bottom how do you time buying back in? If you want to reduce volatility the key is diversity amd uncorrelated assets

@michaelperkins3003 Год назад

I don't think we can talk about versatility and diversity in a portfolio and yet also say ETFs are not needed. Having as many options, as many ways to keep money coming in throughout the years, is vital.

@GodsGratefulGirl77 2 месяца назад

This is the best video I have seen that explains index funds vs. ETFs. Thank you!

@AM-pf5bo Год назад

Thank you for the video. It's very helpful for a beginner like me :)

@SueTNguyen 9 месяцев назад

Appreciate the simplicity of this video. Call your brokerage to confirm your understanding, do not assume.

@Omar-et7sb Год назад

Considering they are almost identical the two advantages of ETF's (tax efficiency and flexibility - for example for Tax Loss Harvesting) makes ETF's objectively better.

@Omar-et7sb Год назад

@@JaredJohnsonRocketMan Changes nothing on what I said thou. Even less "old school" fund owners (Think Eduardo Repetto from Avantis) flat out come out and say it "We have both MF and ETF's but the ETF version is objectively better". In addition to the two reasons I mentioned, with ETF's you could end up saving in fees/gains.

@mplslawnguy3389 4 месяца назад

How would an ETF be better with taxes? I hear this all the time. How exactly? Makes no sense.

@clarissaturcios2346 3 месяца назад

Only difference is that ETFs can be traded all day

@gurmeetchawla8362 Год назад

Thanks a lot. You definitely helped me .

@charlesbyrne71 Год назад

At vanguard you can make smaller periodical investments in an ETF until you get to the 3000 minimum and then move the ETF funds over to an indexed mutual fund.

@supercruchynoodle 6 месяцев назад

Thank you professor G! ❤ Your videos are so helpful and informative. Happy holidays to you

@jollama 6 месяцев назад

Wrong channel bozo

@kyleryxn 6 месяцев назад

You can also automate BUY orders for ETFs depending on your broker

@papabear4066 Год назад

I can do all you mentioned with ETF via ETRADE. Automatic investing, dividend reinvestment, fractional shares purchase etc for VTI-VOO etc.

@Tyler-xx9bi Год назад

Yeah this is what I was looking for in chat. I have a Vanguard account because I started investing before all these cool new apps came out with auto investing and fractional shares. I buy my ETFs on the Robinhood platform with all those functions.

@nimh168 Год назад

You can currently purchase fractional shares at vanguard (their etfs only) by trading in dollar amounts.

@HHHGeorge Год назад

Mr. Tae Kim, that was one of the most informative videos on investing I have seen for some time. Lots of information very little BS. Thank you.

@robertrohler3644 Год назад

Good information, thank you the education.

@OptimizedPortfolio Год назад

You've conflated some terms here in a way that may confuse people. Both ETFs and mutual funds can be "index funds." And both ETFs and mutual funds can be actively managed. Thus "ETF vs. Index Fund" doesn't really make sense. In fact, the first mutual funds were actively managed; index mutual funds arrived later. The opposite is true of ETFs - they were initially solely index products and then actively managed ETFs arrived later in 2008. On the whole, ETFs tend to be cheaper (i.e. lower fees), more tax-efficient, more liquid, and more accessible (no minimums). That's why they've been replacing mutual funds in recent years, and many fund providers like Dimensional are converting their mutual funds to ETFs. Secondly, the broker you choose determines whether you can buy fractional shares, not the ETF. You said "VTI doesn't allow fractional shares." That's simply not true. Most brokers allow fractional shares nowadays. Vanguard as a broker is behind on the times on that one.

@sk.n.9302 Год назад

Really good content, thanks!

@caitlynpotter 3 месяца назад

I really appreciate the dedication in each video you post. To be successful in markets, traders should understand the crossover between asset classes & liquidity flow. Desiree Madison focuses on Multi-asset trading, a single strategy to manage risk, profit, and the code or the actual decision-making across multi-asset classes. Her skills set is top notch.

@CIAragDe Год назад

A mix of both are best in my opinion. The benefit with ETF is that you can sell it at anytime and you will know to the cents how much you are getting for the EtF. VOO monthly !!

@timothyreed7709 Год назад

Hey Tae, what is your thoughts on systems like Wealthfront and Betterment? Do you think you can do a video talking about these types of systems compared to tradional brokages?

@gmo709 Год назад

Ok so there are arguments on both sides but I use both. My auto inv is w VG so I use auto investing threre in Index funds. Now when I make my own purchases when I lean to maybe better times to invest based on bogus news or just mkt overreaction, I like ETFs...lower fees and I can buy during day exactly when I want. Also, I think Schwab allows fractional shares. VG and Fid does not allow auto purch into etfs or stocks btw. Lower fees = less drag over time but it is small in this case. Also, my timing or lean to probabilities based on all the books and youtube and history I havebstudied may be a wash over time but I like the freedom and slightly lower costs of ETFs.

@wread1982 Год назад

I like ETFs cause they show you your gains by the second and it shows your dividends each quarter where as my index fund didn’t

@jaredsuttle6347 Год назад

I do an ETF in a taxable account for tax efficiency.

@pfd1972 Год назад

Is there a difference between vtsax and Vti though for taxes? I honestly can’t figure it out what the tax situation may or may not look like between them in a taxable account since their info in lookup tools is nearly identical except on yield, etc.

@jaredsuttle6347 Год назад

@@pfd1972 I'm definitely not an expert but my understanding is that the difference is in capital gains distributions. ETFs are less likely to have them. Vanguard may have some tricks to limit CG distributions in mutual funds.

@pfd1972 Год назад

@@jaredsuttle6347 thanks for the reply - I recall on someone’s video regarding this topic it was mentioned specifically about Vanguard funds that they had patented a process for their mutual funds that minimized or eliminated distributions and tax liabilities holding the fund. Which is literally what I’m trying to figure out the deal with 😀 - It makes sense and see universal advise that in general ETF’s are or could be more tax efficient which makes sense to me with another layer involved - but I’m one of those odd individuals who tries to understand the why about many things to include the topic of mutual funds and ETF nuances. Worst case I own $500 of each I bought within the last couple weeks in my taxable account (vtsax & vti) and I’ll see the 1099 form in a few months and know my answer about tax efficiency.

@THEUNGOGA Год назад

@@pfd1972 ETF only pays dividends and not capital gains. Index funds can do both. So if you are in a taxable account, better to have an ETF most of the time unless the index doesn't pay capital gains. The idea with an ETF is that there are fewer "taxable events".

@gmo709 Год назад

Good. Less turnover in index ETFs. Less churning, cap gains. There r some ETFs that dont track an index though.

@mikesimone1 Год назад

I exchanged the Vanguard funds I could into ETF's because the capital gains hits were putting me into paying supplemental Medicare fees. Good video but for older people ETF's might be a better choice.

@vincent8900 Год назад

Mutual funds with low turnover ratios would minimize capital gains complications, but as a young investor I prefer ETFs for the tax efficiencies

@123lowp Год назад

ETFs have lower taxes. Mutual funds have higher taxes.

@aantony Год назад

@@vincent8900 Mutual funds even with low turnovers will still have capital gains, or return of capital when people move money out of the fund. I don't mean just when you sell your shares. Thats how everybody got hit last year when Vanguard changed the pricing of some of the funds and lots of people moved to the cheaper ones. The fund will recognize gains that it must pass on to you. An ETF by design, cannot create gains like that becuase shares are created or destroyed as needed, instead of buying and selling underlying securities.

@afridgetoofar1818 Год назад

@@123lowp Not always. Vanguard Mutual funds that have an equivalent ETF, such as VTSAX & VTI, are equally tax efficient.

@Omar-et7sb Год назад

Yea, this was a bit of a bad take from usually sound Tae Kim.

@sailingonasummerbreeze7892 Год назад

Nice presentation!

@JustAlf87 10 месяцев назад

I use the Fidelity Total market fund has a lower expense ratio that any of the ETFs and I can automate my investments.

@almostawesomewithwill9251 Год назад

Im confused…robinhood allows fractional buying and automatic reoccurring investing too. That plus the lower cost of the etf vs index. Am i missing something here?

@JaredJohnsonRocketMan Год назад

I like mutual funds over ETFs because I don't have to make the purchase order. I can just send say $100 every week into the account. Also, there are mutual funds with comparable fees to ETFs. As for ETFs being a tax advantage, that's probably only true when comparing ETFs to actively managed mutual funds. Much less so to passively managed mutual funds. It's certainly a good discussion.

@jerryware1970 Год назад

The difference is how they are legally structured..mutual funds could incur tax liabilities that ETFs wouldn’t..buy the ETF.

@jamesandersonwalsh Год назад

Index funds can come in the form of both a mutual fund or an ETF. You keep saying that index funds are mutual funds. They’re not. They come in both varieties. The vanguard total market index fund comes in VTSAX (mutual) or VTI (exchange traded fund). The difference between a mutual fund and an ETF is one is traded throughout the day and one trades at close or open based on its NAV.

@afridgetoofar1818 Год назад

@@silentnot4812 that’s true.

@dodgermartin4895 Год назад

Good balanced video.

@mnpenner 5 месяцев назад

You can buy fractional shares of VTI and VOO now. They added that ability a few months ago.

@SwarangaSarma Год назад

The big reason that I think you missed is that the tax efficiency of ETFs over mutual funds. This would be a big reason for why someone should prefer ETFs. The other reason of no automatic investment is specific to vanguard and not for ETFs in general and can also be overcome by a simply monthly reminder. If you are in it for the long haul, missing by a day every now and then won’t be significant. It the tax thing for mutual funds do not have a workaround. So for me ETF for the win.

@Davek111 Год назад

100% correct! In addition to the tax efficiency, the ETFs allow for early retirees to have greater control over reportable income so they can qualify for heavily subsidized ACA health insurance prior to Medicare.

@barry3792 Год назад

yeah, I don't get the point of the argument Tae lays out, it was weak sauce and I still don't know why a mutual fund is better than an ETF

@3rett115 10 месяцев назад

@@barry3792 Agreed. I was watching thinking, OK mutual funds it is. The he says ETF is cheaper, has more options, but simply doesn't allow automatic buys? Then the comment section says ETFs are much more tax efficient. So now it sounds like, ETFs it is, lol..

@barry3792 10 месяцев назад

Yeah, I think this was just "content" for the utuber resume @@3rett115

@tyrymanuel 6 месяцев назад

A monthly reminder is fine, but the difference that Tae is referring to involves a fixed amount of contributions being automatically invested into an account. For example, if I want to invest $100 per month into an IRA or Roth IRA, but want to buy a VOO ETF (current price is roughly $432 USD) then I will not be able to buy 1 share of VOO for over 4 months. The money would sit in Vanguard's money market fund as cash until I have saved $432 and then I would have to manually go purchase that 1 share of VOO. Conversely, if I have an index fund set up like VFIAX then I can contribute any variable amount that I want at any period of time and those contributed funds will go automatically into the index fund. I eliminate clicks (either through a PC or a phone) and I do not have to wait while funds would be sitting and losing money in a money market account until I save enough for 1 share of an ETF.

@lonelinessholder 8 месяцев назад

I like ETF better but has been struggling with automatic investing with Fidelity so I started last year with M1, love it

@EIVOR_REX Год назад

I do believe the index funds are designed for high net worth individals. For most ppl, VTI and VOO will be good enough for them.

@PepeCoinMania 6 месяцев назад

True

@Alban.Bytyqi 4 месяца назад

Thank you for this vid

@cholos17 Год назад

Gracias!

@darylallen2485 Год назад

Before this video, I thought I was invested in an index fund. I now know its an ETF. I'm pretty dumb, but now I'm slightly less dumb!🥳

@OptimizedPortfolio Год назад

You're not dumb. ETFs can be index funds. VTI, for example, is an index fund that happens to be an ETF. For some reason the uploader has conflated the terms "mutual fund" and "index fund."

@SantaBarbaraAlberto Год назад

Good video. It needed to address tax-free, deferred, and taxable accounts location. In a tax-free account, it makes no difference, while in a tax deferred or taxable account, it might.

@J4M3Z.T Год назад

Subscribed!

@drewconway7135 Год назад

The terms “ETF” and “index fund” are not mutually exclusive. For example, VOO is an ETF that mirrors the S&P 500, while VTI is an ETF that tracks the entire US market. Both of those ETFs are low-cost index funds.

@NickWright Год назад

ETFs allow you to reinvest their dividends in the form of fractional shares now.

@derekthomas9273 Год назад

I feel like with Fidelity you kinda get the best of both worlds with the ETFs, I have mine set to autobuy VOOG (S&P500 Growth ETF) and it will purchase a factional share of X dollar amount in regular intervals, and automatically re-invest the dividends which has been fantastic over the last 3 years

@EvolvedBonobo Год назад

Yes, I agree that Fidelity is better than Vanguard. Their trading platform is superior, and managining accounts internationally is much easier with Fidelity. Vanguard uses SMS for 2FA which can be problematic when using different SIM cards internationally, whereas Fidelity uses the Symantec authenticator app which easily allows for account access from anywhere in the world.

@hawktangerine405 Год назад

I would argue ETFs for Nonqualified accounts because you won’t receive capital gains distributions every year you hold the stock. While CG distributions are low for index funds, they still exist. I also find it easier to do tax loss harvesting when using ETFs

@valiantsloth Год назад

You can buy fractional shares of vanguard ETFs. Just has to be a market order while the the market is open. Otherwise, you can buy full shares and place a limit order while the market is closed.

@Ray-qv9vb 3 месяца назад

I love mutual funds. At the end of the year I pay taxes on stock sales I never made. The other great thing is that I don’t know the price of the sale of my mutual until market close this way it’s a big surprise. I don’t know why billions of dollars have moved from mutual funds to etfs. Seriously, compared to etfs, mutual funds are terrible choice. Sure 100 years ago you didn’t have a choice but now there are plenty of choices at extremely low costs. Since almost all brokers charge zero commissions there is no reason to not choose ETFs 😅 also unless you buy direct through the fund most brokers charge fees to make purchases

@RoIIingStoned 2 месяца назад

Yea this video is misinformed and I’m barely getting into this stuff. It’s hard to find actual good videos comparing the two; all other popular videos and articles basically say the same thing and focus on bullshit stupid pros/cons like the fractional shares and buy in barrier…

@adamdalziel 6 месяцев назад

I'm not sure the definitions are right in this video. My understanding is: Index fund: a fund that tracks an index (e.g. s&p 500) ETF: a share (that can be traded on an exchange) that holds the underlying shares of the fund Mutual fund: a company that holds the underlying shares of the fund Actively managed: a fund that is manually managed (high fees) Passively managed: a fund that is automatically managed (low fees) So typically an index fund is an ETF that is passively managed. But you could have an index fund that is a mutual fund. And you could have a non index fund that is an ETF. So index funds and ETFs are not mutually exclusive terms.

@philsipad 3 месяца назад

At the depth of the stock market crash around 2008 I sold everything and went all in with leveraged ETFs. Even without adding in another penny I made 10-15x my original investment over the last 15 years. And I didn't have to figure out which is the next Google or Apple. I bought the whole NASDAQ and leveraged up. You guys need to understand, the trick is simple - the fed is on your side, and the market rewards risk. Like Warren Buffet said, when others are fearful, be greedy.

@vijayaragavan440891 Месяц назад

Great, thx

@JOSELUIS-ci2hs Год назад

While ETFs are the most efficient vehicles bid ask spread could outweigh lower fees . You buy index funds at nav whereas ETF at the ask price

@InfinityDz 5 месяцев назад

You've convinced me to buy ETFs 😂

@rickmoore52 19 дней назад

Solid advice.

@hoama939 21 день назад

Thank master

@paulnhbtx713 6 месяцев назад

Great video! What do you think about QQQ long ?

@mnchester 6 месяцев назад

great video!😀

@kw7292 9 месяцев назад

ETF vs. Funds, I've heard different reasons than what is presented here. All good and it doesn't matter which route you pick. Personally, I choose ETF's and enjoy investing.

@mrcortadito 5 месяцев назад

I share your view, but there is an additional point and that is Capital gains in the mutual fund get distributed along holders, even when you have not sold anything out of your position, on ETFs Capital gains are only charged if you sell out of your position. I know it has not happened in a while with these Mutual funds, but they could happen. This is really where the mutual fund manager shines... having enough cash to meet redemptions during a market route and not generating Capital gains and sticking to the "list" at the same time.

@wardwalker30 Год назад

Vanguard now allows fractional buys on ETFs … but they still do not allow automatic contributions to be allocated to ETFs: you have to manually trade them (buy). This is a major PIA for long term investors, and a really curious throw-back to the days when Vanguard only sold whole shares of its ETFs. I wish they would fix this!

@terry_willis 6 месяцев назад

How onerous is a calendar and a few key strokes?

@tyrymanuel 6 месяцев назад

@@terry_willis very onerous, if you are trying to eliminate clicks and decision fatigue.

@akbarnaqvi4737 6 месяцев назад

From my understanding, for most people who are only using tax deferred accounts it basically doesn't matter, and index funds are just easier to automate so better for 90% of people who just need to set it and forget it. When you start contributing to taxable brokerage accounts is where ETFs can give you a bit of a boost.

@trevorward9680 Год назад

Can you comment on the tax impact of both Kim? Seems a big consideration when they are bought in a taxable account?

@OptimizedPortfolio Год назад

ETFs are more tax-efficient than mutual funds.

@bradleys2320 Год назад

Why no mention of the different tax treatments? I thought that was the biggest advantage of ETF over MF for long-term investors?

@darohdarohdaroh Год назад

Fidelity member here and two-fund buy and hold investor (VTI + BND). ETFs beat out Index funds for me because I can still buy in fractional shares (thanks Fidelity) and I avoid the $75 commission associated with buying VTSAX and VBTLX.

@Brian-zy5py Год назад

Hey, I'm also a Fidelity member. Based on my research I want to go with Vanguard's ETF Index Fund options (VTI + BND) like you instead of Fidelity's Index Funds (FSKAX + FXNAX). Does Fidelity have ANY fees for investing in Vanguard ETFs on their platform?

@AllAboutAlgo Год назад

Not sure about other brokers but I buy fractional VTI with Robinhood. So, it is not impossible to buy fractional VTI.

@tph2010 Год назад

I think you can do fractional shares with ETFs now

@evanserickson Год назад

The best argument for index funds is the fractional shares argument. But if you use robinhood or fidelity you can buy fractional shares!

@The.Harsh.Truths 5 месяцев назад

For someone who thinks it’s worth it to deal with headache of buying and selling an illiquid property and maintaining it, I’m surprised that having to click “buy” once every few months for your ETF is reason enough to give up 0.1% expense ratio on a number that will eventually cost you tens of thousands of dollars.

@geluklu Год назад

you can buy fractional shares with vti. i did that.

@george6977 9 месяцев назад

I prefer ETFs as I like to know the price at which I am buying and selling. Imagine selling in October 1987 when stocks fell 23% in a day. With ETFs you decide whether you want to sell at that lower price.

@dumanliveshere Год назад

Wealth Simple rolled out its fractional share option on all available stocks like 4 months ago. So it seems like the fractional share being the only reason not to buy ETF as negligible now.

@dumanliveshere Год назад

@whatsap6160 was the hidden message upsell?