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I sold all my non-retirement stock today (it's not a lot, just a few thousand worth) and am now sitting on in a brokerage account. I did this because I realized I wasn't paying close enough attention to the companies I was invested in/didn't have time to monitor them as closely as I should. I did come out ahead when it's all said and done, minus exchange fees, I made about 4% on my investments. Not great, but like I said, I wasn't able to really actively manage them and, in the end, it's better than losing.
So I don't want the money sitting in cash and I am torn between index funds and the ETFs my broker offers (if I get their ETFs, there are no brokerage fees). I am looking at four options. A REIT ETF, a Mid-cap ETF, a total stock market index fund, and an S&P index fund. I also plan on adding money to whatever the investment is on a regular basis. Perhaps once a month.
The differences to me seem to be the following:
Index funds: Both have an ER of .09% No load, no fees. You buy and sell at end of day price (which is fine as well since this is long term for me).
ETFs: Both have an ER of .07% and pay dividends (which really isn't that important to me). No fees if I buy their ETFs. Trade like stocks (which isn't of much important to me since I plan on keeping the money there medium to long term and I don't plan on doing anything like selling short and such).
So it seems like it just boils down to which investment I like best. In which case, I have to admit I prefer the simplicity of the index funds at this point in time.
So my question is this: am I missing something? Is there some other fundamental difference that is important that I should consider?
First of all, an index fund can be either a traditional mutual fund, or an ETF.
Second thing - brokerage fees can add up if you trade a lot but you should not be trading a lot if you are saving for retirement. So it is more important to get the right fund (mutual fund or ETF) than to worry about brokerage fees.
Personally, I think at this point your best bet is to be well diversified, which is a total stock market (TSM) fund. You can later add specialty markets, like REITs. A very cheap TSM index fund, which happens to be an ETF, is VTI (from Vanguard). It's expense ratio is 0.05%, which is about as cheap as you can find.
Note that some people prefer mutual fund index funds rather than ETF index funds. The reasons are subtle, having to do with spreads and liquidity. None of those should be an issue for a TSM index fund but may be more important for a REIT index fund, or bond index fund.
A total stock would include those other 3 anyways. Do you want to tilt to them more? And to what extent? Without knowing why/how much to tilt, then picking those 4 would be pointless.
I keep a total stock but have a reit at 20-30% (i let it drift and not correct it until it hits 30). I want to have a bit more real estate than what is in total market, so I tilt. I don't use a "total reit" like vnq, but one for a sector that I like.
Just to reiterate this is NOT my retirement savings. This is just savings (and only a small part of my savings). I have separate Roth IRA, 401k all invested in a combination of stocks, bonds, etc. I also have a cash savings account as well.
I will be trading a lot if I decide to start investing monthly in this account. But I suppose it's moot anyway since there are no fees either way.
To answer the question, those are the funds I narrowed things down to. I am interested in REITs because it's real estate and is different from where the bulk of my money is in stocks, bonds and cash. The mid cap ETF is REIT heavy but is a little more diverse than the pure REIT fund. The S&P and total stock market funds are where I have most of my Roth IRA and I like the way they preform and the low fees.
Why 4? I just haven't made up my mind yet, but trust me, it's a narrowed down choice from where I was before. To be fair I like other ETFs better than the two I am considering. It's the brokerage fee that keeps me away (no point in investing $100 a month each month if I lose $10 each time I buy).
yesterday , the thin trading before the end of the year had some interesting results .
vanguards voo etf and vfiax mutual fund are vanguards s&p 500 funds .
vfiax is the mutual fund ,that closed down at nav which was down .46% .
because of the thin trading bumping against the market close voo closed down at a premium to the actual nav and was down only .34% .while the assets were actually down .46% .
stock funds usually trade very close to nav but the thin trading and closing kind of made a pretty big difference between the fund vs the etf . i own both so i happened to notice it . it does not sound like much but on multiple six figures it is quite a bit difference . the fund was down quite a few extra hundred bucks compared to the etf version .. at times the reverse can be true .
i have a mutual fund account at vanguard . i do mostly everything at fidelity through my brokerage account .
so i used the fund for as much as i could at vanguard , then used the etf at fidelity for the difference . .
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