ETFs Help Lower Fees and Increase Returns

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ETFs Help Lower Fees and Increase Returns

michael vodicka

I’m the kind of person who loves getting a great deal. It doesn’t matter what I’m doing. Buying a new car, a new shirt or even groceries, it makes me feel good to know I am being smart with my money.

I take that same approach to investing.

There are all kinds of ways banks and brokerage firms can stick investors with fees.

For example, the cost to make a trade. Some brokerage firms charge $9.99 per trade and others charge $1.00.

That is a large discrepancy that can chip away at returns.

The best way I know to cut down on burdensome fees is to invest in ETFs instead of mutual funds.

ETFs and mutual funds are similar in that they both invest in a basket of stocks. This provides investors with instant diversification without having to select and purchase individual stocks.

The reason I prefer ETFs is because they charge lower fees than mutual funds.

Investors pay an annual fee to own ETFs and mutual funds. That fee is based on the amount of money invested in the fund.

My research shows that ETFs have significantly lower fees than mutual funds.

etfs over mutual funds

Here’s something else that’s great about ETFs.

They also have a strong history of producing better returns than mutual funds.

According to research from Morningstar, 73% of mutual fund underpeform their benchmarks. Take a look below.

etfs over mutual funds

As you can see, investing in ETFs instead of mutual funds is a no brainer. That’s why there is a tidal wave of capital flowing out of mutual funds and into ETFs. Take a look at the chart below.

etf capital inflows

Our services at the Vodicka Group are based on the overwhelming evidence that ETFs are better for investors than mutual funds. Yet I will admit, I talk to investors all the time that still own mutual funds.

If you want to discuss alternatives to your mutual funds drop me an email.

Your Investing Partner,

Mike

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