Vanguard Founder attacks ETFs

Glen_Clark

Thats the story in the FT. As I understand it, Jack Bogle says that investors are trading ETFs far more than they ever did funds. This huge volume of trading is a zero sum game for investors that only benefits the commission takers. But he concedes that ETFs* are fine for those of us who don't trade often.:)
*PS: Except for the leveraged ETFs which are very risky

kidmugsy

Glen_Clark wrote: »

Jack Bogle says that investors are trading ETFs far more than they ever did funds.

Is it cheaper to trade ETFs than funds? UK? US?

JohnRo

The problem with "trading" funds, which can be done for no cost, is that you've no way of knowing, with any accuracy, what price you'll obtain in advance.

Also that fund trading can only be done on a once daily basis.

SnowMan

JohnRo wrote: »

The problem with "trading" funds, which can be done for no cost, is that you've no way of knowing, with any accuracy, what price you'll obtain in advance

The other problem is that single priced funds don't mean there is no charge.

Most single priced funds float (or semi-float) the unit price depending on whether there are more buyers than sellers. If there are more buyers the price is floated up and if there are more sellers than buyers the price is floated down.

Because this 'floating' is done to recoup some of the initial costs those buying and selling are incurring costs. You might be lucky on a single transaction but on average over a number of transactions you lose out.

The full float can typically be between +0.5% and -0.2% of the mid-market net value for a UK equity fund (to reflect stamp duty + dealing costs) which isn't trivial.

dunstonh

There were another thread that mentioned the Vanguard founder and it turned out it was talking about the US retail market and not the UK. I just picked up the FT article and again, it is very US centric.