12.10.2021, 18:29

ETFs won!

ETF funds have earned over $ 4 trillion.

ETFs have been around for about 30 years. They started in 1993. And from that moment on, the struggle began between them and the mutual funds. Indeed, when ETFs came along, the mutual fund industry was a formidable adversary, generating tens of billions of dollars a year reliably in commissions, mostly from highly paid actively managed funds, so he had enough motivation to keep cash flowing.

Why did ETFs win?

First, they were helped by the crisis of 2008-2009. Investors were looking for how to save funds. ETF became one of the possibilities.

Second is the cost. The expense ratio is 0.5% per year. Which is comparable to the coefficient of spending on shares of mutual funds - 0.93%.

Third, it is taxation. When buying shares in mutual funds, you must pay tax if the share has risen in value. You don't have to pay taxes when buying or selling ETFs because they are traded like stocks.

Fourth advantage. ETFs are traded all day long. Mutual funds are valued at the end of the day, so investors do not know the price when placing a trade. Sometimes these deals bring surprises.

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