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David Muhlbaum: Gensidige fonde eller børshandlede fonde? Hvilken er bedre for dig som investor? Det er nok ingen overraskelse, at der ikke er noget let svar, men det er en beslutning, du vil eller skal træffe. Fondsekspert Todd Rosenbluth slutter sig til os for at tale om disse to investeringsinstrumenter. Har du også fået en leaset bil? Du har måske dig selv en lille guldmine der. Vi fortæller dig, hvordan du indkasserer.
Velkommen til Dine penge er værd . Jeg er Kiplinger senior online redaktør David Muhlbaum, og jeg får ikke selskab af min faste medvært Sandy Block i denne uge. I hvert fald ikke til vores åbningsdiskussion, da hun er på ferie og svømmer med hajer eller noget. Jeg spurgte redaktøren af Kiplinger's Personal Finance magasin, Mark Solheim, til at tage hendes plads, blandt andet fordi jeg gerne vil tale om biler og billeasing, og det er noget, han og jeg gør. Tak, fordi du sluttede dig til os, Mark.
Mark Solheim: Du er velkommen, David. Det er dejligt at være tilbage, selvom vi taler om leasing.
David Muhlbaum: Ja. Leasing. Vi havde dig sidst på, da vi havde Karl Brauer fra iSeeCars som gæst til at hjælpe os med at få styr på det vanvid, der er nutidens bilmarked, og det vanvid, tror jeg, vi kan opsummere med to ord, høje priser. Faktisk var det et studie fra Karl Brauers outfit, der fik mig til at ville trække dig tilbage hertil. Det var dybest set en liste over, okay, her er titlen, "De bedste leasede biler til at købe tilbage og sælge for profit." Det ser ud til, at nogle forbrugere er i stand til at drage fordel af høje bilpriser, og det er som om en mand bider en hundehistorie, fordi det normalt ikke er godt derude.
Mark Solheim: Ja, det er sandt. Ja, det er måske lidt af en nichehistorie. Jeg springer måske lidt frem her, men det lyder som om det er en historie om restværdien. Normalt hos Kiplinger har vores råd været, om vi skal lease eller købe, og det er ikke det, vi taler om nu. Problemet med leasing er selvfølgelig, at det er denne argot, denne jargon, som mange mennesker ikke forstår. Aktiverede omkostninger for køretøjets pris-
David Muhlbaum: Restværdi. Terminologi.
Mark Solheim: Ja, restværdi. Pengefaktor for renten. Men det her lyder som en ret god historie. Lad os udforske det.
David Muhlbaum: Okay. Den leasing kontra køb ting. Jeg har altid følt, at vi taler om næsten to lejre. Det er ligesom et partisk skel. Der er lejere og der er købere, og de to skal ikke mødes, selvom der virkelig er gyldige grunde til at overveje det ene eller det andet. Det, det handler om, er på en måde at fortælle folk, der leaser en bil, om at købe en. Den bil de har lige nu, ikke deres næste, den bil de har lige nu, for i bund og grund er den mere værd end forventet. Der er flere ting, du skal bruge for at få dette til at fungere. Du skal være i en leasingkontrakt, du skal være villig og i stand til at købe den bil, du allerede har, og du skal være en slags konceptuel villig til at skifte hold, måske denne gang. Men der kan være mange penge på spil.
Mark Solheim: Okay. Hvor mange penge? Hvad er meget? Tusinder?
David Muhlbaum: Ja. Hvor meget? Nå, det drejer sig om spørgsmålet om, hvad bilens udkøbsværdi var, da du leasede den. Det er en slags restværdi. Den pris blev fastsat for tre år siden. Før denne COVID-mikrochip-drevne bilmangel, som vi og alle har talt så meget om. Ligningen er, hvad bilen er værd nu i forhold til hvad leasingselskabet for tre år siden mente, den ville være værd? Hvad er forskellen? Hvad er deltaet? Okay. Fra iSeeCars undersøgelse, for en Dodge Charger, er det næsten $12.000.
Mark Solheim: Hellig makrel.
David Muhlbaum: I gennemsnit, ifølge iSeeCars undersøgelse, er forskellen mellem alle tre år gamle biler omkring 7.000 USD.
Mark Solheim: Ret. Dette forudsætter selvfølgelig, at du er i en tre-årig lejekontrakt, hvilket er den mest typiske løbetid og 7.000 $ i gennemsnit. Wow. Det er meget, og bestemt værd at udforske. Men hvordan får man det? Du og jeg ved begge, at leasing er fuld af — du ved, der er en kontrakt, og der er gebyrer og mange ting, som du virkelig skal læse det med småt for at vide om. Så hvad er dit næste skridt, eller dit første skridt?
David Muhlbaum: Ja. Ja, ingen sagde, at det ville være nemt, men trin et er viden. Du skal vide, at din leasede bil er mere værd, end alle troede, den ville være. Men du ved, verden af bilvurderingsværktøjer, ja, de er derude online. Du ved, KBB, Edmunds, CarGurus, andre. I hvert fald er der sandsynligvis en god chance for, at en salgsrepræsentant allerede har ringet eller sendt dig en e-mail og sagt:"Hey, hvorfor kommer du ikke ned, indsend lejekontrakten tidligt? Vi skal nok give dig noget godt til den næste." Fordi bilforhandlerne er desperate efter inventar, og de ved, at de kan videresælge din bil med en stor fortjeneste.
Mark Solheim: Ja. Det er ret interessant. Jeg får ikke nogen af de e-mails, fordi vores hovedbil er en 2007. De vil ikke have den. Men et af problemerne med ændringer i bilpriser, selv som dem, vi taler om nu, er, at de fleste mennesker, der beslutter sig for at sælge en bil, erstatter den med en anden. Du skal bytte ind, bytte op, ligesom at købe et hus. Du skal stadig køre noget, du skal stadig bo et sted.
David Muhlbaum: Ja. Ja. Ret. Så fordelen ved at have en højere pris for din gamle bil gør ikke den store forskel, når du skal betale X mere for din nye bil. Men dette er en slags speciel sag. Der kan ofte være forskel på restværdi og markedsværdi i slutningen af leasingkontrakten, og nogle gange er det leasingselskabet, der får fat i den korte ende. Men nu på grund af stigningen i bilpriserne er forskellen stor, fire, femcifret stor.
Mark Solheim: Okay. Forklare. Hvor meget? Hvordan får du disse syv tusinde?
David Muhlbaum: Ret. Nå, ja, i en papirpose? Nej. Så jeg talte om det her med Karl, og jeg snusede lidt rundt. Som ting, der involverer leasing, plejer at være, er det kompliceret. Det har vi allerede sagt. Og det afhænger også af din egen økonomiske situation, inklusive din kreditscore, og hvordan du griber din bil an, for dette kommer tilbage til hele leasing- kontra købslejren. Men lad os antage, at du har en af disse leasingkontrakter, der forfalder, og du planlægger at udskifte den bil. Hvis du bare afleverer den og påtager dig en ny leasingkontrakt, ja, det er ikke et særligt klogt valg, fordi prisen på din nye bil sandsynligvis vil være højere, og du ikke udnytter den øgede værdi af din gamle.
Så omvendt ville den mest ligetil måde at få den værdi på være at udkøbe dit lejemål. Du kan købe den bil, du har kørt, til den lave værdi i din leasingkontrakt. Så kan du gøre en af to ting. Du kan beholde det, forudsat at du kan betale på dit nye lån, for nu er du en ejer, eller du kan sælge det til et hvilket som helst af de zillion steder, der tigger om at sælge dem din bil. Så gå ud på leasingmarkedet med en del af de $7.000 i lommen.
Mark Solheim: Okay. Jeg lagde mærke til, at du lavede noget med småt der.
David Muhlbaum: (Hånende forvanskede ord)
Mark Solheim: Du sagde en del af de $7.000. Okay? Forklar, hvad der tærer på det nummer.
David Muhlbaum: Okay. Nå, jeg vil ikke engang tale rigtig hurtigt. Nej. Først og fremmest var de 7.000 $ bare gennemsnittet fra undersøgelsen, men det er en meget god pointe. Grundlæggende er gebyrer og omkostninger en faktor, som enhver, der prøver denne rute, skal overveje. Ethvert lejemål er fyldt med gebyrer. Der er et gebyr for at købe bilen, der er et gebyr for ikke at købe bilen. Og så bliver moms en reel overvejelse, for hvis du bliver bilejer, skal du nu betale moms af hele prisen på bilen, hvad den nu er værd, når du registrerer den. Undskyld mig. Ikke når det er ... Nå, det er et interessant spørgsmål. Det havde jeg faktisk ikke tænkt igennem. Hvad hvis du køber din bil under markedsværdi, og du dukker op på DMV, og de siger:"Ja, den er mere værd end det?" Nå, det må jeg udforske.
Mark Solheim: Ja. Det er ikke nemt. Det er kompliceret. Men ja, jeg ved det. Det er den slags arbitrage, som leasingpublikummet generelt ikke er til. De kan lide at gøre det enkelt. Her er min månedlige møtrik, jeg får bilen i tre år, afleverer den, får en ny. Hej, farvel, tak.
David Muhlbaum: Ret. Ret. Nej, jeg vil ikke skændes med dig der. Jeg har en fætter, som følger denne model. Hun har, hvad hun synes, er et meget godt forhold til sin forhandler. Hun føler sig godt behandlet, da hun skifter lejekontrakter hvert tredje år. Betaler hun for meget? Måske. Men hun er glad for situationen. Men stadig, og det er en af de ting, jeg diskuterede med Karl, bør selv en person, der tager den tilgang, absolut gøre research for at forstå, hvad deres bil er værd, hvad dens buyout-værdi er, og hvad forskellen er. For når først du erkender det, kan du bruge det som et forhandlingskort med din gode ven i forhandleren. Hvis de ved, at du ved, at du har muligheder, kan de måske gøre en aftale med dig på din næste lejekontrakt, selvom du ikke har nogen intention om rent faktisk at købe den ud. Ja, sikkert. Det er et bluff, men du kan bluffe meget høfligt.
Mark Solheim: Højre, højre, højre. Du er nødt til at bede om at få dine penge. Okay. Jeg forstår det.
David Muhlbaum: Ja. Du skal spørge. Jeg indsætter et link til iSeeCars-undersøgelsen, så du kan se, hvad nogle af de biler, der har mest papirfortjeneste, er. Mark, jeg burde nok lave en køretidskolonne om dette. Jeg vil også indsætte et link til det, selvom det måske ikke er der, når dette udsendes. Men det er det smukke ved internettet. Jeg kan gå tilbage og justere vores filer. Tak, fordi du sluttede dig til os.
Mark Solheim: Åh, du er velkommen. Det er en fornøjelse.
David Muhlbaum: Dernæst er vores hovedsegment en samtale med en fondsspecialist, Todd Rosenbluth, om forskellene mellem investeringsforeninger og børshandlede fonde, og hvilken der er bedst for dig. Og Sandy vil være tilbage for den.
David Muhlbaum: Velkommen tilbage til Dine penge er værd . For vores hovedsegment i dag får vi selskab af Todd Rosenbluth, lederen af ETF og investeringsforeningsforskning hos analysefirmaet CFRA. Se nu, jeg gik allerede og brugte et akronym, så lad mig tage et hurtigt skridt tilbage. ETF'en i Todds titel står for børshandlede fonde, og jeg fortsætter om dette, fordi det faktum, at der er to hovedtyper af fonde - vi vil nok kalde dem investeringsprodukter - investeringsforeninger og børshandlede fonde. Men det er lige der i Todds titel. Det, vi vil tale om i dag, er, hvordan de er ens, men forskellige, og hvornår og hvorfor den enkelte investor måske vil vælge det ene i stedet for det andet. Og også lidt mere om fremtiden for hver enkelt i store træk. Og så burde det være ret klart, at Todd er den perfekte fyr til dette. Han kender dem begge frem og tilbage. Børshandlede fonde og investeringsforeninger. Country og western. Så tak, fordi du sluttede dig til os i dag, Todd.
Todd Rosenbluth: Min fornøjelse. Fantastisk introduktion af mig.
Sandy Block: Ja. Tak, Todd. David, da du sagde country og western, mindede det mig om den scene i Blues Brothers-filmen, hvor de siger:"Vi spiller begge slags musik, country og western."
David Muhlbaum: Det var præcis der, jeg trak mig fra.
Sandy Block: Men her på podcasten har vi nogle gange hygget os tidligere med små smackdowns, kreditkort kontra betalingskort. Det var en. Der er bestemt en fristelse til at prøve at gøre det med børshandlede fonde kontra gensidige fonde. Men jeg ved det ikke.
David Muhlbaum: Vi fandt ret hurtigt ud af, at det ikke ville virke.
Sandy Block: For splittende.
David Muhlbaum: Ja. Helt ærligt gav det ikke mening. Der er bare for mange nuancer. Noget af den nuance håber vi at komme ind på i dag. I stedet for en kamp, vil vi have dig til at hjælpe os. En mand, to fondstyper!
Et par bemærkninger mere, mens jeg bugter mig til vores første spørgsmål, og den ene er, at vi på baggrund af tidligere trafik tror på Dine penge er værd at vores publikum er ret vidende om fondsinvesteringer. Den anden er, at vi i tidligere afsnit har brugt lidt tid på at tale om specifikke fonde, som med ticker-symbolet og alt som potentielle investeringer. Den her, ikke den, den slags. Jeg tror ikke, det bliver den slags show. Det kommer til at være lidt mere generelt, mere om selve køretøjerne, produkterne, hvordan de fungerer, de gebyrer, de opkræver, den slags.
Men hvis du ønsker ticker-specifik, "køb-denne-fond" slags information, lover jeg dig, vi har det i spar. Hvis du bare søger Kiplinger og ETF'er eller Kiplinger og fonde. Masser og masser. Okay. Okay. Todd, jeg sagde lige, at vores lyttere er ret fondskyndige, men vi er stadig nødt til at lave definitioner. Jeg ved, at det er et grundlæggende spørgsmål, og mange mennesker kender svaret, eller de tror, de gør det, men kan du skitsere de vigtigste forskelle mellem investeringsforeninger og børshandlede fonde?
Todd Rosenbluth: Jo da. Lad os starte med en investeringsforening. Det er nok det, folk er mest bekendt med, og de måske har i deres portefølje, og de tror, at det er det samme som alt andet. En investeringsforening er en samlet investering. Du vil holde en kombination af en række forskellige aktier eller en række forskellige obligationer eller en kombination af aktier og obligationer sammen inden for den samme portefølje. Det vil blive forvaltet af en anden, så du ikke behøver at gøre arbejdet selv med hensyn til at vælge værdipapirerne, handle dem, flytte ind og ud af de respektive aspekter af porteføljen. Det har en tendens til at være diversificeret. Du betaler et gebyr for den håndtering af produktet, og så betaler du ofte et gebyr for at handle det pågældende produkt, for at købe ind i det eller for at kunne forlade det produkt.
Så det andet investeringsprodukt, som vi taler om, er en ETF, en børshandlet fond, og de første to ord er det, der fremhæver forskellen mellem denne ETF og en investeringsforening. Det handler på en børs. Ligesom du ville købe en aktie, afgiver du en ordre om at købe denne, og du køber den ofte fra en anden sælger, ikke direkte fra et fondsselskab, og den handles. Du kan kun købe dette i markedstiden. Du betaler en handelsomkostning for det, uanset om det er endda — Ofte er det provisionsfrit, men der er en omkostning i forhold til, hvad du betaler, og du betaler en pris, der er anderledes end porteføljens indre værdi.
Lidt mere kompliceret i, hvordan det er sat op. Men et par af de andre vigtige forskelle mellem en ETF og en investeringsforening. De fleste ETF'er tager et lavere gebyr end en investeringsforening gør. De fleste ETF'er sporer et indeks i modsætning til at have en porteføljeforvalter eller et forvalterteam, der udvælger individuelle aktier eller obligationer. Den børshandlede fond følger et indeks som S&P 500, Russell 1000, Bloomberg Aggregate Index, men de fungerer på samme måde. Du får et lignende niveau af diversificering. Du bare — Det er sat anderledes op. Det er nogle af de vigtigste forskelle mellem en ETF og en investeringsforening. En ETF plejer at være billig, den plejer at blive administreret af en indeksudbyder, og du køber og sælger handel med en anden i modsætning til at lægge nye penge i en fond.
David Muhlbaum: Tak skal du have. Jeg vil bare bemærke til alle, der lytter med, Todd's i New York City. Det kan du sikkert fortælle. Sådan er livet. Ambulancerne kommer forbi. Men tak for det. Det er meget bredt. Jeg håber at finde en ressource, fordi du har delt et par slides med os på forhånd, som meget godt afgrænsede nogle af disse forskelle. De er omfattende og betydningsfulde, og jeg håber, at vi vil finde en ressource online, som vi kan indsætte i shownoterne, som vil nedbryde dem, så folk, der ønsker at vende tilbage til det, kan vende tilbage til det. Men ser man på nogle af de punkter, du kom med — en af de vigtigste ting, du nævnte, er, at mange ETF'er ikke er aktivt forvaltet, er indeksfonde, der følger et indeks.
Og det er nogle investeringsforeninger også. Jeg vil gerne springe til den enkelte investor, som skal se på, som måske har det meget ligetil valg om at investere i, lad os sige, den gode gamle S&P 500, ikke? Nå, du ved, selv at kigge, og vi vil indsnævre det yderligere. Lad os lige se på Vanguard. En person, der vil, ønsker at investere i en indeksfond, der sporer S&P 500, hos Vanguard, de kunne vælge en ETF af den, VOO, eller investeringsfonden, VFINX. Hvad og hvorfor ville vejlede deres beslutning? Jeg mener, du har åbenbart fortalt os meget om gebyrstrukturen og den slags. Men for den enkelte investor, hvilken vælger de?
Todd Rosenbluth: Tja, gebyrerne kommer til at være ret ens. Der er enten tre basispoint eller fire basispoint eller fem basispoint afhængigt af den forskellige version af Vanguard 500 Index Fund, du har. Og så du kommer ikke til at gøre den store forskel med hensyn til ydeevne med hensyn til disse gebyrer. Så det betyder måske noget, hvilken type investor du er. Så i en ETF, det faktum, at du kan foretage den handel, har du likviditet i løbet af dagen, du kan vælge at rebalancere den og gøre det på en mere problemfri måde, hvilket kan være en fordel for dig som investor. Hvorimod det med en investeringsforening er nemmere at lave noget som dollar-omkostningsgennemsnit og indbygge en position og planlægge disse ændringer.
Du vil måske også opdage, at du måske ikke selv træffer dette valg. Det kan være inden for en 401 (k) plan eller et pensionsprogram, du har. Og så i så fald er investeringsforeninger næsten altid det valg, du har. ETF'er er ekstremt sjældne at finde inden for en 401(k) plan, bare fordi nogle af de fordele, der følger med en ETF, ikke giver mening. Du laver ikke den intradag-handel, og gebyrerne har en tendens til at være lavere, fordi de institutionelle aktieklasser er oprettet. Så hvis du selv træffer valget, er der sandsynligvis ikke noget godt eller dårligt valg mellem Vanguard 500 Index Mutual Fund og Vanguard 500 ETF. De ejer nøjagtig de samme værdipapirer, de opkræver næsten de samme omkostninger.
Sandy Block: Jeg vil tage fat på det, Todd, fordi David og jeg diskuterede hele 401(k)-spørgsmålet, og det faktum, at hvis du har de fleste af dine penge i en 401(k)-plan eller alle dine penge i en 401(k) plan, så tror jeg stort set ikke, at du kan investere i ETF'er, medmindre du drager fordel af et mæglervindue, hvilket er noget, jeg skriver om lige nu. Men meget få investorer gør det. Er der nogen chance for, at det ændrer sig? Grunden til, at jeg stiller det spørgsmål, er, at vi har en masse historier i vores magasin og vores hjemmeside om folk, der søger ETF'er for meget specialiserede indekser. De er attraktive for folk, og jeg spekulerer bare på, om dette vil ændre sig, eller er der bare noget institutionelt i 401(k)-planer, der gør ETF'er ikke rigtig bæredygtige?
Todd Rosenbluth: Det er mere, tror jeg, inerti. Udbyderne til 401(k)-planer opfordres bare ikke til at foretage ændringen. De har ikke gjort backoffice for at gøre dette muligt. Det vil ske, men jeg tror, at jeg har sagt det i de sidste 10 år, at det vil ske, og jeg vil nok stadig sige det i de næste 10 år, at det vil ske på et tidspunkt. Men du kommer med en glimrende kommentar om, at med indeksbaserede ETF'er er der bare mange flere valgmuligheder. Så en investor, der kan lide en lavere omkostningsstruktur, kan få mange mere granuleret og enten mere målrettet eksponering mod enten lavere risikoaktier, udbyttebetalende aktier, mere tematisk langsigtet tilgang til nogle af de temaer som cybersikkerhed eller ren energi, der bliver stadig mere populære.
Der findes ikke investeringsforeningsvalg, der sporer disse indekser på samme måde, som de gør i ETF. Så jeg håber, at vi kommer til at se ændringer, men det har jeg håbet i et stykke tid. ETF-strukturen giver mere mening for vores langsigtede investor, fordi gebyrerne har en tendens til at være billigere. Så hvis vi kan få indeksbaserede investeringsforeninger, så måske, men den indeksbaserede investeringsforeningsverden har en tendens til at være ret bred S&P 500-lignende.
David Muhlbaum: Ja. De nævnte fondenes særlige karakter. Vi havde faktisk stort set en hel podcast om kun en håndfuld midler, teknisk set en, om pladsinvestering. Det var et klassisk tilfælde af, hvor du havde dette ekstreme fokus på en del af branchen, og de strukturerede som en ETF. For at springe tilbage, fordi jeg pegede på ordet, du talte om inerti, at der er inerti i denne industri. Til en vis grad er det også inerti og en lille "c"-konservatisme. Tingene ændrer sig bare ikke så hurtigt. Jeg håbede, du kunne give os lidt af den generelle historie om gensidige fonde, som er noget, du ved, i vores levetid, bare altid har eksisteret, og så ETF'er, som er den relative nykommer. Kan du bare give os en hurtig historie om, hvordan hele denne idé om at samle ting opstod, og hvor den står?
Todd Rosenbluth: Jo da. Så investeringsforeningen er næsten 100 år gammel, i hvert fald baseret på den historie, jeg har. I 1924, tror jeg, var det Massachusetts Investment Trust, som jeg tror er den længstvarende fond. Det er stadig tilgængeligt for investorer —
David Muhlbaum: Jeg tror, Vanguard Wellington også gør en påstand, så jeg.
Todd Rosenbluth: Ja. Måske har det været...
David Muhlbaum: Ret. De kan bekæmpe det.
Todd Rosenbluth: Ja. Nå, vi bør ikke desto mindre fejre historien om 100-års mærket for investeringsforeningen. Og sådan var det, du ved, i årtier. Og faktisk blev gensidige fonde aktivt forvaltet, indtil Vanguard lancerede den første af Vanguard, hvad det blev, Vanguard 500 Index Mutual Fund, tror jeg, i 70'erne. Igen, Jack Bogle, som var, du nævnte, var i Wellington, oprettede Vanguard og hjalp med at være banebrydende for indeksbaseret investering i investeringsfonden. Vi skal spole frem til 1993, hvor den første ETF, som også fulgte S&P 500, kom på markedet. Det var fra State Street. Tickeren er SPY. Så det er nu 28 år gammelt.
Og vi har kun set en udvikling i forhold til antallet af produkter, der er udkommet. Begge har vi nu set mere indeksbaserede investeringsforeninger. Vi ser faktisk nu aktivt forvaltede ETF'er. The ETF industry in the United States is almost $7 trillion dollars, $6.7 trillion in total assets currently as it stands today, but is still far smaller than the mutual fund industry. Most folks are still choosing or still hold mutual funds. And perhaps, you know, you've pinged off of my comment of inertia. Some of that has to do with perhaps inertia. If you held a mutual fund for decades, there's no reason to make the change just because there's a newfangled ETF that's come around in the last two decades. Good products are still good products.
David Muhlbaum: Right, and there could be significant tax consequences depending on how they're holding onto it. Why would you change just for the type? But one scenario where I was thinking,where someone who was not used to ETFs could all of a sudden essentially have the opportunity to invest in them, and perhaps, if I've got this right, do it without those tax consequences, is on a 401(k) to IRA rollover. I'm waiting for one of you to jump and go, "It doesn't work that way." But-
Sandy Block: No, it does. I think it does because in the story that I'm just working on, pretty much, and Todd can back me up on this, I think once you move money into an IRA, you can invest in just about anything, but like collectibles. I assume that means the ETF world is open to you then, right? Is that right, Todd?
Todd Rosenbluth: I believe that's the case. So, you can buy an ETF in any of your IRA programs. I'm less versed in the conversion into an IRA, but yes, the advantages you'd have. Now, some of the advantages of using an ETF in the IRA get muted. The tax, we didn't touch on as much. But ETFs tend to be more tax efficient because when I want to sell shares of my ETF, I'm selling it to one of you as opposed to dealing with the fund company. So, Sandy, if I sell my shares of SPY and you buy it, it only affects the two of us. It doesn't affect any of the other investors. Whereas in the mutual fund, if I redeem my shares, it does cause or could cause a tax implication for the broader shareholder base. So, if you're in a tax protected account, there's less of the benefits, but still benefits.
David Muhlbaum: The impact of that trading shows up in the end of the year when you get your capital gain distributions in your mutual fund, which are either taxable or not, but they’ve got to be thought about. But so, in my little theoretical, someone who had a 401(k) that perhaps held VFINX, the Vanguard S&P 500, they could — once they've rolled over their 401(k) assets — they could sell VFINX and buy the ETF, VOO. It's theoretically possible. Is there an argument for it?
Todd Rosenbluth: Well, I think the reason to do so is if you're using other ETFs. So, it's just easier to have a portfolio if you're gravitating towards ETFs in general and you want to build your portfolio using the S&P 500 as your core. But you want to increase exposure to a certain sector or focus more on a lower volatility product. Vanguard offers some of those in a mutual fund structure, but many of them, they don't. They offer now ETFs that they don't have a mutual fund for, assuming you want to stick with just Vanguard as opposed to diversifying your asset managers. So, it helps you because ETFs in a pool of investments is easier to track than some ETFs and some mutual funds. But I don't know that you'd necessarily want to swap the exact same product, to just go from mutual fund to ETF.
Sandy Block: No. I mean, it sounds like picking up on what we discussed earlier, Todd, if you did a rollover into an IRA, the ETF world offers you an opportunity to either be a more active or more specialized investor than maybe you could have been in your 401(k).
David Muhlbaum: You mentioned the relative amount of money that is in mutual funds versus ETFs, and that mutual funds are still larger. But my understanding is there's a directional flow happening in the market. Essentially money is leaving mutual funds and heading towards ETFs in a sort of broad approach. So, on one hand, we have this question, what should the individual investor do? What do I do with this? But we can also measure, what are all the investors doing, right? And they are increasingly picking ETFs.
Todd Rosenbluth: That's correct. So, in the United States, we saw record inflows into ETFs in 2020, $504 billion — we've blown that away. As we're recording this today, we are about $600 billion of net inflows through the end of August. Already passing the record. Most of the money has gone into equity ETFs, particularly index-based ETFs. Investors are still comfortable and using actively managed fixed income mutual funds. We've seen money continue to go into those products. Even though we had record inflows into fixed-income ETFs in 2020 and we might actually break that record again in 2021.
So with fixed income, we're seeing investors use both those products. Increasingly, investors are choosing an equity ETF over an equity mutual fund, but that doesn't mean people should do so; they should stick with the products that make sense. If I can add two quick additional bigger picture things that's happening. One is that we've started to see actively managed mutual funds actually convert into ETFs this year. So we’ve seen, we saw a relatively small firm, Guinness Atkinson, do that. We saw a much larger firm, Dimensional Fund, do so. With about $30 billion, they converted existing mutual funds that were low cost and lightly active management. And now J.P Morgan has announced they plan to do so in early 2022. We're likely to see more of this, and that's just money directly moving from a mutual fund into the ETF structure. Then the second thing is that we're seeing more firms that previously only offered actively managed mutual funds offer actively managed ETFs.
So, Fidelity has offered ETF versions of some existing mutual funds. T. Rowe Price has done so. Where now the big elephant in the mutual space, Capital Group, that runs American Funds, plans to launch ETF strategies using the same management team, but different names and there'll be nuanced differences between the products. Now investors are going to have a true choice between whether or not they want an ETF or a mutual fund, as opposed to only sticking with active mutual funds or index-based ETFs, and then we'll see. You'll have that battle you wanted to have between the debit card and the credit card. Investors are going to vote with their wallets.
Sandy Block: So, Todd, let me just drill down on that a little bit, because you said you should choose the one that's right for you. Any thoughts on how to make that choice — given, you know, all things considered, you're not just talking about a 401(k) plan where you really don't have — If you have the option, what you should be thinking about, mutual funds versus ETFs?
Todd Rosenbluth: It probably matters a few things, your time horizons for investing and your patience in doing so, and then whether or not there's choices available for you to achieve the goals that you want. I'll try to tick those off if we can. If you're a buy-and-hold investor that doesn't need the advantages of liquidity to be able to trade and to rebalance it yourself, but you want somebody else to do that for you, you can certainly build a couple of, have a couple of mutual funds or even just have, make it simple and have an asset allocation or target date mutual fund to achieve those goals for you. You pay perhaps a little bit more than you would in an ETF, but someone's doing that work for you.
If you want to keep it simple and you want index management, there's simple index-based products — Vanguard and Schwab among them — that offer those products. Whereas if you want to have a more tailored portfolio, you want to be able to focus and , overweight certain sectors or overweight certain styles, you have more confidence in your ability or your advisor that you may be working with’s ability to allocate towards those respective areas. Or you want to invest in index-based products that have longer-term themes. You touched on space investing. That's one of them. There's a whole range of those products that don't exist in the mutual fund world. So, we at CFRA have clients that are only using mutual funds. We have some that are using only ETFs. We have some folks that have had mutual funds that have continued to build ETFs into their portfolio. It really comes down to a personal choice and we want to provide the research tools. I know you at Kiplinger want to write articles that help people to sort through those various choices and make sense for them.
David Muhlbaum: Coming back to something you talked about earlier, I was aware of the concept, you know, of fund companies offering essentially a ETF versus mutual fund version of the same fund. But you talked about these direct conversions where a company that was offering a mutual fund changes it to an ETF. And I just want to try to figure out what this means to the individual investor who already owns shares of, well, we'll call it the predecessor mutual fund. Do they get liquidated and converted to ETF shares?
Todd Rosenbluth: It was a non-taxable event that took place. One day they owned a mutual fund, the next day it became an ETF. They had to do nothing. It just converted it for them. Then they had the liquidity if they were unhappy. If despite hearing all of this, they don't want to own an ETF, they don't believe in it or it's too complicated, they could choose to sell. That would be a taxable event. But this was done behind the scenes and seamlessly.
But we're going to see some more of this, in my opinion, but I don't think we're going to see a lot more of it. And partially why is that with mutual funds there’s often multiple share classes. There's an advisor share class and there's a retail share class and an institutional share class, and converting all of those together, pulling that back together and then making that conversion and getting all of those shareholders to be comfortable with that and those changes is probably harder to do. Which, in part, why we're seeing Fidelity launch Fidelity Magellan ETF. They continued to have Fidelity Magellan, the mutual fund, because they wanted to give investors the choice instead of making the choice for them.
David Muhlbaum: Yes, that was the one that was rolling around the back of my head, the Magellan. Well, Todd, we're planning another podcast soon about target date funds, which are another slice of the market altogether, and I'm generalizing here, kind of the opposite of what the active trader using ETFs is likely to favor. But I know there are people out there who own both. They're deep into trading, but they might also have their kid's college money in a target date fund. Anyway, the point here is not to go too deep into target date funds, because Lord knows we're going to do that someday. But to ask you,Todd, how the mutual fund versus ETF question plays into those. Since a target date fund is a fund of funds, their managers get to pick which kind, which are they picking?
Todd Rosenbluth: So, they're picking what their fund company offers. So, there are some ETFs that exist within these target date mutual funds. I believe, for example, that BlackRock, which offers target date funds or fund of funds, they may not be target date funds, but certainly fund of funds, they are using ETFs alongside mutual funds to round it out. It makes sense when it's their own products, and so target date funds tend to use the home cooking that's provided. But then also you can just bring the cost down by often using the index-based ETF instead of in a large cap core. So they might own — I don't know if they do — for example, they might own the S&P 500 through IVV, which is iShares S&P 500 ETF and then have some active management in other asset classes to build around it. And so, they're doing so. But many of the firms either don't have an ETF structure, or if they do have an ETF structure, they're relatively new, relatively or they're less liquid right now. But it perhaps is something that we could see: T. Rowe Price or Fidelity beginning to use their own ETFs within it and improve the liquidity all around.
David Muhlbaum: To go back to my, to go back to our 401(k) investor who, at least for the most part, doesn't have access to ETFs. Sandy, we'll get to the brokerage window one of these days. But doesn't have access to ETFs. But if they owned a target date fund in their 401(k), they could indirectly own ETFs. They may not even know it, but at least it's theoretically possible.
Todd Rosenbluth: It certainly is possible that they have it, and I'll hit on the key point, to me, of what you said, is that they may not know it. And that's part of what we're doing here, what you're doing of trying to educate investors. If you own a target date fund, it's probably worth knowing what's inside it, understanding the allocation, the same way that you would if you were building a portfolio yourself using individual stocks just because it's easy to own a target date mutual fund. Doesn't mean you should stop the homework there. You can understand it and make sure it's the right one for you. But there are no target date ETFs that exist. There are some asset allocation, so they own other ETFs within it. BlackRock, among others, run some of these products where they'll do the work for you. It will rebalance so that you'll get back to having a 60/40 split or a 70/30 split between equity and fixed income over time so that you don't have to do that. But that's the disadvantage or one of the disadvantages to using an ETF is you have to do the work to rebalance it yourself.
Sandy Block: So, Todd, you mentioned earlier on that, one of the advantages of ETFs is that they are cheaper. Now we have written and I've followed for years about how mutual fund expenses have gone down a lot, especially if you stick with index funds. But how much less expensive are ETFs and how relevant is that? Are we putting too much on fees here?
Todd Rosenbluth: So, let me cover that. I'll do the second half of that first. We're spending too much time collectively focusing on fees. Now, you want to pay as little as possible, but you don't want to just buy the cheapest product that's around because often the cheapest product, it offers you much different exposure and what's inside-
Sandy Block: You get what you pay for sometimes.
Todd Rosenbluth: You get what you pay for and what's inside the portfolio, the stocks or the bonds are what is going to drive the fund higher relative to its peers and keeping up with the broader market much more than the fee savings you might get. You certainly shouldn't be selling out of something just because something cheaper came around. You wouldn't sell your house just because something else came on the market down the block for a little bit less money. It's probably a different house.
Now, fees are important though. ETFs tend to be much cheaper. Because they’re, often because they're index-based and in part because of the competition that's happening within this space. There's dozens of index-based ETFs covering equity and fixed income investment styles that charge less than 10 basis points. There's actually two different fund families that offer ETFs where there is no fee at all. You pay a 0% fee and that's not for a limited time offer. They're charging you nothing for the product, and what they're hoping is that you'll buy other things within the fund family and build products around that. That doesn't mean you should buy the cheapest product around. The Vanguard 500 index-based ETF charges three basis points, and it's got hundreds of billions of dollars in assets. People are not moving out of it.
With mutual funds, the fee tends to be closer to 100 basis points if it's actively managed, and then there's gray areas in the middle. So your actively managed ETF will probably charge 65 basis points, maybe even lower, 50 basis points. Your index-based mutual fund will be closer to the fee of the ETF. There's a long answer to this. There's a wide range of different choices. The fees keep coming down because money is chasing and going after the lower cost products. But investors shouldn't just buy the cheapest product around it. The free products are good, but they may not be better at all than what you have today, and you would cause a taxable event by selling out of Vanguard 500 to buy the Bank of New York Mellon large cap ETF, BKLC to save three basis points. You'd actually lose money as a result of that, in all likelihood.
David Muhlbaum: Ja. That inertia we spoke of, it's not. Inertia sometimes, I think, has a negative connotation like, "Oh, I'll get around to that." But actually it also reflects wise choices about the entire tax strategy of how you manage your investments and not just jumping for what looks like a marginal savings and forgetting the big picture. That's an important nuance you brought up, Todd. I think it's something we can use thinking about from time to time, because a lot of us, including here at Kiplinger, can get pretty obsessed about fees. But, you know, as we've said, you’ve got to think about what you're paying for here.
Todd Rosenbluth: Indeed. It should be one of the metrics that you focus on when choosing the fund in addition to performance, in addition to the exposure that you're getting, in addition if it is an actively managed fund is to how long that manager has been in place. Fees matter, but they're not the only thing that matters.
David Muhlbaum: Excellent. Just to come back to the idea of the smackdown, I am just curious, do you get essentially the cocktail party question like, well, which is better?
Todd Rosenbluth: I get asked which is better, and then I get asked for, okay, well, then if you choose that-
Sandy Block: Which one?
Todd Rosenbluth:. .. which one and which one would you buy and what the reasons are.
Sandy Block: That's the cab driver question.
David Muhlbaum: They want specifics. They want specifics.
Sandy Block: Ja. That's the cab driver, the Uber driver. Yes, right?
Todd Rosenbluth: They want specifics. But more, I mean, I think it's in part, people are increasingly gravitating towards ETFs, so they might own a mutual fund and have questions about an ETF and what makes it different than what they know, because mutual funds are just what most people have or people my generation have grown up with. The younger generation and my kids won't know, won't have thought much about a mutual fund because ETFs are more of what they know. I think that we're seeing that in survey studies as well in terms of ETFs are increasingly being used by a younger generation of investors. But, you know, everybody I think is getting more comfortable with it. The greater comfort, the better, because ETFs benefit from the liquidity and the buying and selling of other people.
You want to know that somebody's going to buy what you're looking to sell and that there's inventory and vice versa on it. So, I think we're at an inflection point where we're going to see more and more focus on ETFs and less perhaps on mutual funds. But anyone that owns a mutual fund, again, I'll reiterate, should not make a change just because there's something relatively new that's come around.
David Muhlbaum: That is a great summation of the dynamics of the market today. Both the broad, what's happening on the big level, and what the individual faces in choosing, well, A or B, B or A — "I've had A, should I get B?" I hope that in what we've covered today, we've given people some of the tools to guide those decisions. Thank you very much for joining us today, Todd. Really appreciate it.
Todd Rosenbluth: No, it's been my pleasure. It's a great conversation and happy to work with you guys.
David Muhlbaum: That will just about do it for this episode of Your Money's Worth . If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you've already subscribed, thanks. Please go back and add a rating or review if you haven't already. To see the links we've mentioned in our show, along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. If you're still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at [email protected]. Thanks for listening.