For the index investing folks

I want to start an index portfolio but i wanted to know which company do you guys use for all your index portfolio (Vanguard, Morninstar, etc) or do you guys mix the funds from different companies. Because I have found in some the expense percentage is lower for some fund is lower, so I think the best strategy is to mix them from the diferent companies. I wanted to know do you guys do it this way or are there benefits from having all your funds from 1 company. Thanks

Is this for your personal portfolio? I use ETFs to index because of the lower tracking expenses and less tax headaches, it’s something that they teach in the L3 curriculum. I tend to stick to iShares or SPDRs but wil go elsewhere if there’s an exposure I can’t get from those funds.

Now that i look into it, its better to use ETF to start up rather than index portfolios, because of the initial investment requirement.

If you dollar cost average and expect to buy and hold, mutual funds are better.

What’s the logic on that, former trader? Is it simply because you don’t have to manage reinvestment of dividends? Because the management fees on MFs are often higher.

I index. Whats the take on weekly dollar cost averaging. Yea yea I know this a holding period return calculation, but what other empirical evidence exists?

@bchad - Also because of transaction costs. If you DCA into ETFs on a monthly basis you’ll get hammered on transaction costs. For example, let’s say you index using five ETFs and you sock $500 away each month, $100/ETF. Using a low cost broker you’re looking at least spending $25 a month just on trading ($5 per trade). That’s akin to a 5% front load.

If you index using Vanguard (or whoever), there’s no transaction costs, fees are competitive with ETFs, and dividend reivestment is easier/free. SPY costs 10 bps while Vanguards S&P 500 index fund (VFIAX) costs 5 bps.

Not saying mutual funds are always better, but for long-term DCAing they’re definitely the right choice.

Good points. I guess I’m spoiled by IB’s $1 per trade prices that I forgot that if you are socking away small amounts, that can turn into a front-end load.

I sort of assumed that transaction costs would be similar in ETFs vs MFs, but if you are dollar cost averaging small amounts at short intervals, I can see how small differences can rack up.

For those who want to trade ETFs but are worried about transaction costs I think TD Ameritrade allows you to trade ETFs for free. Looks like a pretty comprehensive list and I think the only catch is you have to hold them for a certain amount of time (not an issue if you’re dca though). Might be worth looking into.

https://www.tdameritrade.com/trade/etflist.html

Transaction costs.

I dollar cost average 4 index funds every month (US, CAD, Europe, Emerging mkts). That’s 48 trades a year where I pay 0 transaction costs. I know a few people that DCA once a week and would get killed using ETFs.

To answer the question I believe you should focus on product and not company. That would most likely lead you to use more than one ETF company. Most important things to consider

  1. Cost

  2. How is the index constructed ( what are the holdings, tax structure, futures or actual holdings, swap, market weight or other as fundamental or equal weight etc). i.e. Some BRIC ETFs have the same mandate but weightings among the contries differ a lot.

I believe some of the EFTs offer free DRIP and free Systematic Investment plans but your broker needs to support that.