Quote:
Originally Posted by bizaro86
The biggest difference is the fee going to the financial advisors who sell mutual funds. It's basically the compensation for the advisor embedded into the product. (And realistically, they have to get paid like everyone else). There are some advisors around who work on a "fee-only" basis, and charge a fee either hourly or as a percentage of assets. Then you would buy "f-class" funds which don't charge the extra fee for the advisor, or break the fee out separately.
Basically, the cost of the advice is bundled into the cost of the fund. Typically with ETFs, you either don't get the advice or pay for it independently.
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I just plain disagree with you on this. While its true that there is a fee there, the reality is that someone gets paid off the ETF as well, and that includes the transaction fee to acquire the fund in the first place.
The reality is that ETFs and mutual funds are vastly different in how they're used and how they are invested in. A mutual fund is more of a buy and hold type of investment whereas ETFs aren't necessarily. In fact the average holding period for some of these instruments is about three days, whereas you can't even do that with a mutual fund, let alone whether you would want to! Then you add in the double short/double long ETFs and you have a whole other ballgame. When you really look at the instruments themselves they are really quite different, and that has nothing to do with how the compensation is paid, despite the ETF industry wanting to promote that factor.