The rise of Exchange Traded Funds (ETFs) has changed the way many investors choose to place their money in equities, given the ease, diversification, and lower fees ETFs provide passive
investors with over long periods of time.
Picking stocks has traditionally been a time consuming and stressful exercise which many investors (who want higher returns but not necessarily the stress that comes along with picking stocks) choose to avoid.
With many ETFs now offering access to highly diversified product offerings for a management-expense ratio (MER) of less than 0.1%, the traditional mutual fund industry has taken a big hit.
Companies offering mutual funds with MERs in the 3%-4% range are being forced to justify said fees, and when compared to the majority of ETFs, after adjusting for fees, mutual funds perform much worse over the long-run than ETFs.
A simple 3%-4% difference is huge over a very long period of time, and investors need to consider the impact of trading fees and taxes when buying and selling securities solo. Mutual funds often are similar to the way "do-it-yourself" investors invest - trading securities multiple times in a given month rather than buying a stock and sitting on it for years is the norm.
These trading fees add up over time, an analysis few investors engage in, but one which will inevitably show long-term profitability which may be much lower than expected over long periods of time.
Just buy the darn ETF and sit on it - you'll likely be better off.
Invest wisely, my friends.
