If nothing else, the United States is a country of choice. When it comes to investing in index-tracking products, you have two basic options: exchange traded funds (ETFs) and index funds.
Index funds and ETFs often get compared because they share similar goals: to make investors the most money, but cheaply. Mark Jewell for Boston U reports that there are index funds and ETFs that invest in the same segments of the market and whether they hold stocks or bonds, the key distinctions are expenses and restrictions on how investors can get in and out. [9 Reasons ETFs Are Preferred Over Mutual Funds.]
Now, there’s a twist.
Vanguard plans to launch 19 new funds this month that will be the first of their kind in the industry. The share class will designate whether someone is investing in a mutual fund or an ETF that holds the same underlying investments. Vanguard unleashed the first wave yesterday, which you can read about here. [Schwab Celebrates ETF Industry.]
This will put a chink in the usual mutual fund to ETF competition, and many are viewing this move as a smart “and” solution, instead of the usual “either/or” deal. Because of Vanguard’s move, holdout advisors and investors may finally be convinced to make the leap into the ETF share class.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.