This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

John Bogle Is Wrong About ETFs

And it's certainly better than the one too many people use, which is to jump into a mediocre, actively managed fund with high fees after it's had a good year, and then panic and sell if it falls.

But there are four problems with this argument. The first is that you can also pursue this strategy using an exchange-traded fund. The biggest difference is just that it will be easier to trade. If you fear that trading is going to end up destroying value, then don't do it. Leave your fund alone.

The second problem is that even if you want to follow Bogle's index strategy, you may well be using an online broker to manage your money, and that broker may charge you a trading fee to invest in a Vanguard fund anyway. Many people manage their finances through an online broker for the simple reason that it is very convenient. You can make an investment when you actually have the time, such as when you're in the office and stuck on hold.

And when you invest through an online broker, you have all your money in one place. You get to make investments easily when money comes in, and that isn't always easily predictable from month to month. For those people, an index ETF may work as well as an index mutual fund. Contrary to what Bogle suggested, buying and holding an index ETF is little different from buying and holding an index mutual fund.

The third problem is that it is harder to move money in mutual funds, even if a rival company offers a better deal. If you have your money at Vanguard, and Fidelity cuts its prices, switching is time-consuming and involves paperwork. But if you have an account with an independent broker and buy ETFs instead, you can shop around at the click of a mouse.

But the biggest problem with Bogle's argument is none of the above. It's that not everyone wants to follow his index strategy anyway.
2 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs