The real benefit of the low cost of an ETF is realized in a long term strategy. For example, if an investor purchases a fund such as the Vanguard Total Stock Market (NYSEAca: VTI) with an expense ratio of 0.07%, the yield of 1.95% can make up for the cost alone, and the chances of cost eating into principal is very low.
Another advantage that investors have with ETF investing is the competition going on within the business. Brokers are offering free trading with various in-house accounts in an attempt to gain more market share. An investor that has a strategy and can be selective on which funds to choose from can have an all-ETF portfolio at little or no cost. [An All-Seasons Model ETF Portfolio]
Furthermore, plenty of brokers are extending the commission-free trades into alternative retirement accounts, like an IRA, reports Rittorno.
Tisha Guerrero contributed to this article.