How Smart Beta Could Help in a Frothy Market?
Justin Kuepper
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Let’s take a closer look at smart beta funds, strategies for frothy markets...
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One of the biggest reasons why mutual funds have a higher cost than ETFs is because of the need for indexes to constantly rebalance, which results in commission costs that coincide with bid-ask spreads. ETFs do not have this issue due to a process called creation and redemption-in-kind that avoids these costs. Another cost issue with mutual funds has to do with something called “cash drag.” Mutual funds are required to have a certain amount of cash to cover potential net redemptions. ETFs are not required to do this, due to the same creation and redemption-in-kind feature.
Lower fees are driving investors to passively managed funds. Our article on fund management fees explains the different fees investors pay to have their funds managed.
Mutual Fund | Index / Benchmark | ETF | ||||
---|---|---|---|---|---|---|
Ticker | AUM (billions) | Expense Ratio | Ticker | AUM (billions) | Expense Ratio | |
VFINX | $269.67 | 0.16% | S&P 500 | SPY | $189.39 | 0.09% |
FSTVX | $34.60 | 0.07% | Dow Jones U.S. Total Stock Market Index | VTI | $62.60 | 0.05% |
FSSVX | $1.87 | 0.23% | CRSP US Small Cap Index | VB | $13.42 | 0.09% |
VGSLX | $60.10 | 0.12% | MSCI US REIT Index | VNQ | $30.84 | 0.12% |
VBMFX | $176.00 | 0.16% | Barclays Capital U.S. Aggregate Bond Index | AGG | $0.42 | 0.05% |
To learn more about index funds, check out our Index Funds page.
Receive email updates about best performers, news, CE accredited webcasts and more.
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One of the biggest reasons why mutual funds have a higher cost than ETFs is because of the need for indexes to constantly rebalance, which results in commission costs that coincide with bid-ask spreads. ETFs do not have this issue due to a process called creation and redemption-in-kind that avoids these costs. Another cost issue with mutual funds has to do with something called “cash drag.” Mutual funds are required to have a certain amount of cash to cover potential net redemptions. ETFs are not required to do this, due to the same creation and redemption-in-kind feature.
Lower fees are driving investors to passively managed funds. Our article on fund management fees explains the different fees investors pay to have their funds managed.
Mutual Fund | Index / Benchmark | ETF | ||||
---|---|---|---|---|---|---|
Ticker | AUM (billions) | Expense Ratio | Ticker | AUM (billions) | Expense Ratio | |
VFINX | $269.67 | 0.16% | S&P 500 | SPY | $189.39 | 0.09% |
FSTVX | $34.60 | 0.07% | Dow Jones U.S. Total Stock Market Index | VTI | $62.60 | 0.05% |
FSSVX | $1.87 | 0.23% | CRSP US Small Cap Index | VB | $13.42 | 0.09% |
VGSLX | $60.10 | 0.12% | MSCI US REIT Index | VNQ | $30.84 | 0.12% |
VBMFX | $176.00 | 0.16% | Barclays Capital U.S. Aggregate Bond Index | AGG | $0.42 | 0.05% |
To learn more about index funds, check out our Index Funds page.
Receive email updates about best performers, news, CE accredited webcasts and more.
Justin Kuepper
|
Let’s take a closer look at smart beta funds, strategies for frothy markets...
News
Iuri Struta
|
Check out our latest edition of mutual funds scorecard.
Kristan Wojnar, RCC™
|
This week we are diving into the subjects of infographics, words that can...
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Mutual Fund Education
Justin Kuepper
|
Let's take a closer look at how ESG investments have outperformed during the...
Mutual Fund Education
Daniel Cross
|
While CITs and mutual funds share many similarities, there are some key differences...
Mutual Fund Education
Sam Bourgi
|
The phrase ‘bear market’ has been thrown around a lot lately, but it...