ETF held up to a brokerage firm's mirror reads FTE

[Bylo Selhi]

Perhaps this helps to explain the proliferation of ETFs [my bold] Exchange traded funds feed many

The main advantage of ETFs, once over the commission hurdle, is that they offer a reduced annual expense ratio. An investor share of Vanguard's traditional, total-market index fund charges 0.19 percent per year. The ETF equivalent charges only 0.07 percent ($70 per year on $100,000).

Out there in the rest of the financial world, it's a different picture.

The average index fund charges 0.70 percent and the average ETF charges 0.40 percent. So, "Where are the customers' yachts?" If the definition of an index fund is one that is "passively managed" (which means no active stock picking), then who gets to keep all that extra money?

If Vanguard can keep track of a total stock market index for 0.07 percent, that should tell us something about where the money for those yachts is coming from. ETF held up to a brokerage firm's mirror reads "FTE -- Feeding Trough for Everyone."

According to John Bogle, the founder of Vanguard, ETFs have generated a 16,000 percent profit, in at least a few cases, for those who invested the seed capital to get them off the ground.

[Taggart]

Perhaps this helps to explain the proliferation of ETFs [my bold] Exchange traded funds feed many

The main advantage of ETFs, once over the commission hurdle, is that they offer a reduced annual expense ratio. An investor share of Vanguard's traditional, total-market index fund charges 0.19 percent per year. The ETF equivalent charges only 0.07 percent ($70 per year on $100,000).

Out there in the rest of the financial world, it's a different picture.

The average index fund charges 0.70 percent and the average ETF charges 0.40 percent. So, "Where are the customers' yachts?" If the definition of an index fund is one that is "passively managed" (which means no active stock picking), then who gets to keep all that extra money?

If Vanguard can keep track of a total stock market index for 0.07 percent, that should tell us something about where the money for those yachts is coming from. ETF held up to a brokerage firm's mirror reads "FTE -- Feeding Trough for Everyone."

According to John Bogle, the founder of Vanguard, ETFs have generated a 16,000 percent profit, in at least a few cases, for those who invested the seed capital to get them off the ground.

As soon as Vanguard provides fundamental ETF indexes, at cheaper cost, and I can get interested in, either for the U.S. or International markets, I'll make the switch. Until then I'll stick with what I have.

[George$]

As soon as Vanguard provides fundamental ETF indexes, at cheaper cost, and I can get interested in, either for the U.S. or International markets, I'll make the switch. Until then I'll stick with what I have.

Isn't there a fundamental problem with 'indexes for profit'. Everyone involved nowdays is greedy for a share of the spoils.

S&P500 would not allow Vanguard to use their old contract for the 500 index (which was at minimal cost to Vanguard) going forward with their 'Vipers' version. S&P wants their higher cut via royalties. This drives up indexing costs.

In my view indexes themselves should not be used as profit gnerators.

Perhaps like the CPI index, there should be some market index equivalents.

[Shakespeare]

In my view indexes themselves should not be used as profit gnerators.

Perhaps like the CPI index, there should be some market index equivalents.

So you advocate an official, government-sponsored stock index?

[marcharry]

What is the "etf equivalent" of VTI that costs .07?

[Bylo Selhi]

So you advocate an official, government-sponsored stock index?

What's government got to do with it? We (i.e. FWF) could create an "open source" Canadian index. Fr'nstance, the Canuck 50 could be the 50 largest (by public float) shares that trade on Canadian stock exchanges. (Note that I've conveniently avoided referring to the TSX and that, unlike the S&P 500 et al, no "index committees" are required.)

What is the "etf equivalent" of VTI that costs .07?

VTI is the ETF equivalent of "Vanguard's traditional, total-market index fund [(VTSMX), that] charges 0.19 percent per year."

[Maciek]

So you advocate an official, government-sponsored stock index?

What's government got to do with it? We (i.e. FWF) could create an "open source" Canadian index. Fr'nstance, the Canuck 50 could be the 50 largest (by public float) shares that trade on Canadian stock exchanges.

This is a really good idea. You could license such an index under Creative Commons or similar open source license. We could all learn quite a bit about what goes into index construction, in practice. For example, handling shares #50 and #51 swapping positions every 3 days on account of an oscillation in value.. "Real" (ahem) indexes tend to handle such things gracefully.

(Note that I've conveniently avoided referring to the TSX and that, unlike the S&P 500 et al, no "index committees" are required.)

Could you explain this? Would there be a problem in using "TSX" data as opposed to data from "Canadian stock exchanges"?

[Bylo Selhi]

Could you explain this? Would there be a problem in using "TSX" data as opposed to data from "Canadian stock exchanges"?

I have no idea if there would be a problem. But note that the index that's commonly known as the TSX Composite index is called the "S&P/TSX Composite Index" on the TSX website. I suspect there's a good reason (or more) for that, that money has changed hands over it and that S&P and/or TSX might not be amused if we created indexes in competition with them

[parvus]

bylo cited:

The main advantage of ETFs, once over the commission hurdle, is that they offer a reduced annual expense ratio. An investor share of Vanguard's traditional, total-market index fund charges 0.19 percent per year. The ETF equivalent charges only 0.07 percent ($70 per year on $100,000).

I'm confused. How is it that the index fund is more expensive than the ETF? Is there some difference in distribution or listing costs?

[AltaRed]

I imagine one substantial additional cost for the index mutual fund is trasactional costs, i.e. the constant buying and selling of stocks to match cash inflows and outflows (creation and destruction of units) on a daily basis. Another probably would be constantly keeping track of cap gains/losses from buying and selling of component stocks.

[Bylo Selhi]

I'm confused. How is it that the index fund is more expensive than the ETF?

Different sales channels. Different customer service responsibilities. Etc.

Open-end index funds don't have to be a lot more expensive, e.g. TD eFunds Canadian Index at 30bp vs. BGI Canada's XIC, which tracks the same TSX Comp index, at 25bp. (5bp on $100k is $50.)