Why I Prefer Index Funds | ETF vs Index Fund

Are you trying to figure out which investment option is better for you, an ETF or an index fund? In this video I break down the differences between these two types of investments and explain why I personally prefer index funds over ETFs.

Timecodes:

0:00 - Intro
0:33 - Index Fund 101
1:54 - Higher Diversification
2:28 - Low Operating Cost
3:32 - No Need to Hire an Investment Manager
4:30 - Net Asset Value
5:10 - ETF 101
6:44 - Why I Prefer Index Fund
7:08 - No Need For Bells & Whistles
7:34 - No Automatic Investment
9:08 - Minimum

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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed.

[PapiChulo-ts]

My strategy combines ETFs for dividends and growth, including JEPI, DIVO, QYLD, SCHD, and JEPQ. Last year, my dividends totaled $102K. but not sure how to mitigate risk thus far for this year.

[alexsteven.m]

I have been a dividend focused investor for a long time. This does not mean I don't own growth stocks, I do. A well rounded portfolio should be a mixture of both categories. One way to minimize the anxiety out of stock market investing, is to make sure you keep a large cash cushion. I invest in the market, but never put all my money in market.

[ChristopherAbelman]

The whole talk about "reverse" market crash (real estate and stock market) basically argues that we are nowhere near done with inflation and that we might actually experience "hyperinflation" in the near future combined with accelerating poverty levels across the nation or going thru a historical economic depression...those are the extreme conditions that have produced the reverse market crashes in most examples I've seen. I personally don't see anything that extreme coming, but who knows?

[TheJackCain-]

This is my fifth year after retirement. I’e been following the 4% rule thing I saw on a youTube channel, but this isn’t really how hard I expected things to be. After I cashed out a lump sum, I still have about $760k left, but at this rate, and with how the market is (we were putting money away in an index fund), I’m starting to get really worried.

[zdog]

If an ETF and index fund are exactly the same, such as vti and vtsax, I would recommend the etf for tax efficiency. Look at what happened with the vanguard targeted date mutual funds--they distributed huge capital gains because of all the money moving to admiral. Anyone holding those index funds in taxable got hosed. Etf is tax efficient and doesn't distribute those gains. I'm surprised you didn't mention this very important point

[Deborah-rx]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274, 800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[AaliyahKhalid-kqgl]

The fin-Market;s have underperformed the U.S. economy as fear of inflation hammers the prices of stock;s and bonds. My portfoliio of $750k is down to $592k any recommendation;s to scale up my return;s during this crash will be highly appreciated.

[Gorrilla_diesel]

I use ETF's in my ISA and index funds in my SIPP but I swear by them both great content thank you.

[blusquirrel]

I share your views. But an ETF which pays a dividend can be great, especially in a bear market such as this.

[genep.]

I'm a life-long investor, and I am heavily invested in VOO. That is an ETF SP500 Index fund. Yes it's an ETF, with a bid/ask, can trade intraday, benchmarks the S&P500, very low cost expense ratio, and is non-actively managed. So I would have to say this ETF is an awesome index fund, with an expense ratio of 0.02! Beat that!

[richardhead]

I think you mean to contrast ETFs and mutual funds. Both mutual funds and ETFs include index funds and active funds. The main difference between ETFs and mutual funds is how they are traded.

[poolking]

Two updates/corrections:
1) you can automate ETF purchases with fidelity. They allow fractional shares and you can purchase VTI or VOO weekly, monthly, etc.

2) you can buy fractional shares of ETFs with Vanguard

[MasterpieceFinance]

I love Index Funds & ETF's myself! Index funds for my retirement accounts, ETF's for my regular brokerage accounts. Great video Tae!

[doomshallot]

You can have both. I buy VT, which is both an ETF and an Index fund. Nothing wrong with ETF's in my opinion. Actively managed funds are what I avoid.

[Bleys]

Amazing how someone can speak as much on this while conflating index fund with mutual fund. The choice is ETF vs Mutual Fund, with either one typically holding an index within it for a passive investor.

[lailaalfaddil]

The most important thing that should be on everyone's mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies.

[Bonez]

I combine index fund + ETF's for the best of both worlds:

I keep around $5k in the index/mutual fund versions of investments (VTSAX/VTIAX, etc), and then when I have $15-$20k in the mutual funds I perform a tax-free conversion to the ETF counterpart for the lower expense ratios. This allows me to buy the funds at NAV and set up recurring investments without having to actually 'buy' ETF's and cross the bid-ask spread. The majority of my investments are in ETF's after I perform periodic conversions.

[modernfinancialplanning]

Some index mutual funds pay year end capital gain distributions meaning that you could incur a capital gain even if you didn't sell the mutual fund which makes it slightly more advantageous to hold ETF's in taxable accounts. ETF's typically don't have year end capital gain distributions because of the way they are structured.

[IVRollemberg]

Insightful video. I just want to know best how people split their pay, how much of it goes into savings, spendings or investments. I'm 33, and earn nothing less $150k per year, but nothing to show for it yet

[doug]

I started off with VTI and VXUS (ETFs) a couple years ago. I like being able to buy at any time with a few button presses on my phone. The holdings and costs are the exact same as VTSAX and VTIAX. And it's easier for new investors to start with ETFs because there isn't a $3, 000 minimum requirement.