Michael Kitces’ Post

📢 Understanding the Difference: Index Funds vs. Mutual Funds 🔍 Confused about the distinction between index funds and mutual funds? Here are 5 key differences to help you make informed investment decisions. 💰 Lower Costs: Index funds are like the "Costco of investing" with fees up to 10x lower than average mutual funds. Studies show that low-fee index funds often outperform higher-fee mutual funds. 🌍 Different Themes: Index funds track specific indexes like the S&P 500, while mutual funds may focus on themes such as emerging markets or growth stocks. Choose based on your risk tolerance and diversification goals. 💼 Professional Management: Mutual funds are managed by professional money managers, aiming to beat benchmarks. Actively managed funds have higher costs, but there are also index mutual funds available. 💸 Capital Gains Distributions: Mutual funds experience taxable capital gains distributions, even if you haven't sold your shares. ETFs, on the other hand, typically don't trigger taxable events until you sell your investment. #Investing #IndexFunds #MutualFunds #FinancialPlanning #InvestmentTips

As consumers demand lower and lower fees to invest, a growing number of mutual funds are converting ETFs. According to Kiplinger , "on average, the converted ETFs are charging investors fees that are almost a quarter of a percentage point less than they charged as mutual funds". While this may sound like a minor difference, even small changes in fees can result in significant variances in investment profits when compounded over many years. For investors seeking every advantage, the increasing availability of mutual funds in the form of more cost-effective ETFs is encouraging. For investors with advisor-managed accounts, engaging in a conversation about this trend with your financial advisor is recommended. Your advisor should be well-informed about shifts in the investment landscape and ready to assist you in capitalizing on funds with lower fees. #financialplanning #financialadvisor #ETF #mutualfund #wealthmanagement #fees #investing https://loom.ly/h2FsPtQ

The last passive portfolio you will need that can outperform just about any diversified portfolio out there. This week in ThePeachPit I discuss asset diversification, or diworsification, and how it can effectively be ineffective. For some, diversifying away risk is ideal. Given this notion, I created the Diversified Equity & Income portfolio that will allow the most passive investor to perform at the market, manage risk, and eliminate those pesky 1% fees that eat into performance. The net expense ratio for this strategy is a mere 16bps! Be sure to subscribe for biweekly reports on ETFs & Mutual Funds and single name company analysis every Tuesday & Friday! https://lnkd.in/gZx65psa

Asset managers had to forego billions in fees from US fund investors last year as exchange traded funds ate into revenues from mutual funds, research suggests. Morningstar’s annual US fund fee study indicates US investors saved nearly $3.4bn in fund expenses last year compared to the previous year as the average asset-weighted expense ratio edged down from 0.37 per cent to 0.36 per cent, continuing a multi-decade downward trend. #funds

A closer look at Morningstar's 2023 Annual US Fund Fee Study, "which found the average expense ratio paid by fund investors continues to decline, though at a reduced pace." This is in part explained by the fact that "prominent index mutual funds and ETFs are nearing a fee floor," as well as "the rise of active and alternative ETFs" leading to "higher-priced fund launches" and "cost pressures" preventing "asset managers from continuing to cut fees." In fact, the report found, "more funds increased their fees than decreased them," for the first time since 2019. https://lnkd.in/gX3-V3Ej.

🤔 ETFs and index funds might seem identical. However, despite many common traits, they have some significant differences that investors should consider when choosing a fund to invest in. Explore more from the article. 👇 #tradingInsights #ETFs #IndexFunds

It is disappointing that many U.K. platforms, which at one time were pivotal to innovation and opening up investor choice, are now proving a barrier to these. The world has moved on from 12pm daily priced funds, and more development is needed in the platform space to ensure U.K. investors can access the full suite of investment products to meet their investment requirements, be they traditional open-ended funds, ETFs, investment trusts or funds with notice periods such as Long Term Asset Funds (LTAFs). #investment #etfs #funds #LTAF

Ask White Top Investor: Can low-cost ETFs double returns over mutual funds?  Investors have the potential to double their investment returns by switching from low-return mutual funds to low-cost ETFs! The difference in investment returns between the two options is due to the costs. ETFs have efficient structures designed for stock market listing, which lowers sales and management costs. In contrast, mutual funds were designed for paper record-keeping before the electricity era and have higher and recurring management and sales fees. By switching to ETFs, investors can avoid or reduce these charges and may collect double the returns! For more details, discussion, and other FAQs, see the lesson: https://lnkd.in/guzD43dP

Are you considering ETFs within your portfolio? Whether it’s index or active management, there will be ebbs and flows depending on market performance but the allure and access to ETFs continue to grow within Australia.   For more information on Zenith Dynamic ETF portfolios, go to https://lnkd.in/ggZpEmYV #ETF #portfolios #assetallocation 

Interesting piece from the Financial Times (based on Morningstar research): Active Dividend Funds outperform their passive peers by far: "Passive index-tracking equity income funds have “consistently” underperformed their actively managed rivals over the past decade, research from Morningstar has shown. The findings are highly unusual in that the vast majority of active funds typically deliver worse returns (...) actively managed dividend funds often avoid the highest-yielding stocks and instead combine yield with dividend growth to build a more robust and balanced portfolio, Morningstar said, as active managers not only assess the potential for dividend growth, but . . . examine the sustainability of dividends . . . [to] help avoid dividend cutters.” #activemanagement #dividends FIRST PRIVATE Investment Management #outperformance #longterminvesting #funds