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If you ask me, over time the dividing line between mutual funds and ETFs will get blurry.
ETF MERs are increasing...esp. for the exotic ETFs.
In the last 3 years, the number, type and complexity of ETFs has increased 20x, leaving ordinary investors more confused than ever.
Also, the exotic and complex ETFs kinda defeat the purpose of passive and agnostic investing.
If you are cherry picking based on sectors, countries, geographies, size of companies, dividend vs. non-dividend, and a host of other parameters, you are already implicitly betting on certain factors, isn't it.
The couch potato type strategy is still the best use of ETFs/index funds, IMHO.
 

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Interesting. These low-cost ETFs are great. I love them. I also have an index fund at my bank with an MER of around 0.65% which is quite reasonable.

People are getting wise to the banks and their sky-high MER's.

But I don't think things will stay the same. Once the masses have flocked to the ETFs, they'll raise the MERs. Just you watch.
 

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Well said, HAROLDCRUMP


Buying a pile of ETF's really defeats the purpose of having ETF's in the first place. You are cherry picking ETF's...which is no dufferent than cherry picking individual stocks.

ETF's are now getting more and more specific....which also defeats the purpose.

The more exotic, specific, and narrow the ETF, the higher the MER.

Read John Boogles book,( the Father of ETF or index investing),,its called
The Little Book of Common Sense Investing.
 

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Discussion Starter #7
Just don't buy the latest exotic, specialty ETF's from the creative whiz kids in the financial services industry.:mad:

Stick with the broad-based, heavily traded ETF's with the lowest fees.:cool:
 

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I stick with no-load MFs because I invest by making relatively small monthly contributions. The trading fees make this impossible with ETFs, I'd pay more in fees than I would earn in interest. Maybe once I have about 30k to invest I will buy some ETFs.
 

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I'd say thats the correct strategy.

I would advise that you stick to low cost, low MER , index funds where you can. Any fees you save will only add to your bottom line.

I'm not at TD , but know that their E-series funds might be a good choice.

Good luck
 

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Discussion Starter #13
In some categories, including small caps and emerging markets and perhaps some others, I still believe that active management can be a justifiable choice in adding enough value to justify the added costs.

Am I out of line with that type of thinking??
 

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Kae, why do you like your MF vs. what ETFs have to offer? What makes them better in your view?
I don't think my MF's are necessarily "better" than ETF's, because of course that statement would depend on too many factors. However, for me, personally, MF's are better because I am able to invest smaller amounts more frequently and therefore get better dollar cost averaging. ETF's are usually only good for lump sums due to the trading fees. My MF's have outperformed the market more times than they haven't, so it makes up for the higher MER's.

That being said, ETF's just don't attract me. If I stumbled across $10k, that would be a different story!
 

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I stick with no-load MFs because I invest by making relatively small monthly contributions. The trading fees make this impossible with ETFs, I'd pay more in fees than I would earn in interest. Maybe once I have about 30k to invest I will buy some ETFs.
Sorry, I did not see this earlier. Royal, this is exactly my line of thinking.
 

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In some categories, including small caps and emerging markets and perhaps some others, I still believe that active management can be a justifiable choice in adding enough value to justify the added costs.

Am I out of line with that type of thinking??
Nope.
 

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Got it - makes sense. Thanks for explaining.

Yeah I understand dollar cost average. But for me, that isn't as attractive because I'm one of those lump-sum investors. I have never invested less than $2K in one shot and my investments are usually in once-annually chunks like that. Basically I save all year, if everything goes well and there are no dark clouds on the horizon, THEN I invest the money. I don't like giving access to by bank account to do monthly debits. Monthly payments are evil. I will give them the money, they will not take it.

I don't expect anyone to agree, it's just how I do things. Thanks again for explaining.
 

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I don't currently own any ETFs, but I am considering setting up a coach potato portfolio based on them.

The more I read on the mechanics of ETFs, the more confused I get.. and that confusion leads to concerns. MFs have an inherent comfort about them for me - knowing that the MF shares are backed by owned stocks. There's some paranoia out there suggesting the whole house of cards could come crumbling down.. and perhaps I am buying in to that paranoia.

I think my main problem is that I don't yet understand ETFs and how they work and what the real risk actually is. When I don't understand something, I feal uneasy giving it my money.

is anyone else on the fence a bit about these or am I reading too many articles written by naysayers?

All of that said, they seem to be a great deal on the surface!
 

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Conventional equity ETFs are backed by stocks in the same way that MFs are. Better, in fact. If you have enough units of the ETF, you can redeem them for the underlying shares in all the companies the ETF holds. This is how the prices of ETFs are helped to track the index--market makers/arbitrageurs create and destroy units whenever the value of the ETF deviates too much from NAV.


I'm curious what the critics are saying. My guess is that there are down on the more exotic ETFs, such as leveraged or inverse indices, or most of the commodity ETFs, which is probably fair. Some of these are questionable investments, and not for novice investors.
 

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is anyone else on the fence a bit about these or am I reading too many articles written by naysayers?

All of that said, they seem to be a great deal on the surface!
If you're doing a couch potato thing, just stick to basic ETF's that track us/cdn/europe/emerge market indexes, you'll be fine.
 
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