Thursday, August 3, 2023
"What is the difference between an index fund and an ETF? ", 3 AUGUST
The differences between an index fund and an ETF boil down to four main areas -- fees, minimums, taxes, and liquidity -- all of which can help you to determine which one is your best option.
1. Fees and expenses
The primary difference between ETFs and index funds is how they're bought and sold. ETFs trade on an exchange just like stocks, and you buy or sell them through a broker. Index funds are bought directly from the fund manager.
Because ETFs are bought and sold on an exchange, you will pay a commission to your broker each time you make a trade. That said, some brokers offer commission-free trading.
Dividend distributions compound the issue of the differences between how ETFs and index funds are bought and sold. Dividends paid by index mutual funds can be automatically reinvested (fee-free!) into more shares of the fund.
However, when an ETF pays a dividend, you'll need to use the proceeds to buy more shares, incurring additional commissions and spending time logging into your account to make a quick trade. Some brokers may offer an automatic dividend reinvestment plan on a limited set of ETFs.
ETFs generally have a slight advantage when it comes to annual expense ratios -- which is the percentage of assets you'll pay for managing the fund. But the difference between expense ratios for widely traded ETFs and index funds has narrowed in recent years and almost disappeared. For more niche indexes, though, expense ratios could differ widely, usually favoring the ETF.
2. Minimum investments
You can invest in an ETF by buying as little as one share, which used to be the easiest way to start investing with very little capital. Several fund managers have lowered their minimum investments for their most popular index funds, so these days you can get started with a relatively small amount of money. The following table shows the minimum investments for S&P 500 mutual funds from three leading asset managers.
| INDEX FUND MANAGER | INITIAL MINIMUM | MINIMUM ADDITIONAL INVESTMENT |
|---|---|---|
| FIDELITY | $0 | $0 |
| VANGUARD | $3,000 | $1 |
| CHARLES SCHWAB | $0 | $0 |
3. Tax differences
Long-term investors who are saving for retirement should use tax-advantaged retirement accounts such as 401(k)s and IRAs. I say this not just because it's smart -- because we all know minimizing taxes means more money left in your pocket -- but also because it means you can completely ignore the complicated details of the tax consequences of investing in different types of funds.
Index funds and ETFs are both extremely tax-efficient -- certainly more so than actively managed mutual funds. Because index funds buy and sell stocks so infrequently, they rarely trigger capital gains taxes for investors.
When it comes to tax efficiency, ETFs have the edge. Unlike index funds, ETFs rarely buy or sell stock for cash. When an investor wants to redeem shares, they simply sell them on the stock market, generally to another investor.
When an index fund investor wants to redeem an investment, the index fund may have to sell stocks it owns for cash to pay the investor for the shares. This means mutual funds have to realize capital gains by selling stocks, which results in capital gains (and taxes) for everyone who continues to hold the fund, even if they are currently losing money on their investment.
4. Liquidity
Liquidity, or the ease with which an investment can be bought or sold for cash, is an important differentiator between ETFs and index funds. As previously mentioned, ETFs are bought and sold like stocks, meaning you can buy or sell them anytime the stock market is open.
On the other hand, index fund transactions (like those of all mutual funds) are cleared in bulk after the market closes. So if you put in an order to sell shares of an index fund at noon, the transaction will actually take place hours later at a price equal to the value of the fund at market close. Typically, the cutoff time is 4 p.m. ET. Orders entered after the cutoff are pushed into the next day and completed at the fund's net asset value a day later.
If you consider yourself a trader, this matters. If you consider yourself a long-term investor, it really doesn't matter much at all.
Index Funds vs. ETFs
An ETF is best if you're an active trader or simply like to use more advanced strategies in your purchases. Since ETFs are bought and sold on exchanges like stocks, you can buy them using limit orders, stop-loss orders, or even margins. You can't use those kinds of strategies with mutual funds.
If you're investing in a taxable brokerage account, you may be able to squeeze out a bit more tax efficiency from an ETF than an index fund. However, index funds are still very tax-efficient, so the difference is negligible. Don't sell an index fund just to buy the equivalent ETF. That's just asking for all sorts of tax headaches.
Buy an index fund if your broker charges high commissions on your purchases and you want to be fully invested at all times. In some cases, you may be able to start investing in index funds with a lower minimum than for its equivalent ETF.
Index funds are also a great option when the equivalent ETF is thinly traded, creating a large spread in the difference between the ETF price on the exchange and the value of the underlying assets held by the ETF. An index fund will always price at the net asset value.
Always compare fees to make sure you're not paying too much of a premium for your choice. If you're on the fence between an ETF and an index fund, the expense ratio could be a good tiebreaker.
DINARLAND UPDATE, 3 AUGUST
MarkZ
[via PDK]I know a number of very connected people who are traveling to be in place by Friday. I hope it means this thing is finally coming to an end. We just don’t know. But it is very encouraging the sheer number of reports from folks that were asked to travel and be in place. Stay calm – but this is getting interesting.
“Iraq and Kuwait to settle territorial and maritime borders” They are sitting down and working out anything left on the table from the Iraqi invasion of Kuwait under Saadam Husssein. They are committed to settle any outstanding disputes including joint oilfields…The information continues to be phenomenal from Iraq…
Mountain Goat
There is so much we are not being told and probably will not know until one morning we wake up and find that FOREX has been updated and the dinar reinstated.
But remember also they can not just pop it out there either since they must follow the process of deleting the zeros…The RV is coming but I refuse to hype up events and lie to you. WE must relax and let it come to us.
MilitiaMan (KTFA)
If you go back a month, two months or three months you can see there’s been progress. I know it seems like they always seem to be kicking the can but to be fair I think what’s happening is it’s like a moving target. It’s constantly being adjusted and many many many things are happening behind the scenes…
Bruce (The Big Call)
[via WiserNow]
As far as we can tell by the sources that we have, everything is done on the banking front…I’m really looking forward to getting something in the way of a notification. Hopefully, tomorrow. Now, this guy wouldn’t have said unless he believed that’s what’s going to happen….Things are definitely happening… let’s see what happens.
"IRAQ BOOTS ON THE GROUND REPORT" BY FIREFLY, 3 AUGUST
Frank26 (KTFA)
[Iraq boots-on-the-ground report]
FIREFLY: TV news saying from parliament the work of the budget law will increase the value of the dinar…saying budget to be implemented in next few days and committee formed to watch the exchanges.
FIREFLY: That US ambassador said the CBI took appropriate actions on the banks that were dealing in dollars so the sanctions were removed on those banks. Word of that has the street market already lowering and getting better…
There are no issues with Kurdistan . There are no issues with the monetary reform. Both of them are being attacked by…Iranian politicians that want to steal. Everyday they’re being caught…busted… arrested. Every day they’re being kicked out of Iraq . Every day they’re loosing their merchants and losing their banks. Good. Because that is what’s stopping you from having the new exchange rate of the Iraqi dinar. That is what’s stopping them from releasing the new lower denoms and coins…
Q & A GLOBAL CURRENCY RESET , CURRENCY EXCHANGE & ZIM BOND REDEMPTION BY GINGER'S LIBERTY LOUNGE, 3 AUGUST
Q&A Global Currency Reset Foreign Currency Exchange and Zim Bond Redemption, Ginger’s Liberty Lounge on Telegram:
- Q: Ginger, if/when it does happen – do you think there will be leniency in scheduling an appt, or is it dictated to you, very short timeframe, and you can’t miss that appt?..just curious!..and thank you for your thoughts!!
- A: For those taking the regular notifications route — You may choose your appointment time. No leniency if you miss. It’s not like they can just squeeze you in later that day because they will eventually have tight appointments booked all day and well into the night.
- Some RC may be even running 24 hrs in certain areas (such as Texas where they have the highest number of Zim Bond holders in that State than anywhere else in the world. Florida has the 2nd most Zim holders.)
- If you’re really late or miss your appointment, you’ll be placed at the back of the line and given a chance to reschedule after the people who didn’t miss their appointment get to be seen, which might be two weeks later, possibly.
- At one time I understood that there would be about 30 days for processing these transactions. In February, though, someone said that the timeframe given for these transactions would be about 15 days. To be honest, I’m not sure I believe it due to the fact that I’ve been told people who are traveling, such as for business, family emergencies, etc, may not be able to come in at a brief window of merely a two week period. So, what are they gonna say? “Forget you – You missed it. Too bad for you!” ??? No!!! I don’t believe that would happen. I don’t believe that one bit.
- I’m sticking to what I’ve learned in the past — You will likely have up to ten days to MAKE (book/schedule) your appointment and you must be seen within 30 days OF making that appointment. This is what makes sense to me. But I admit the exact details have changed over time – so ask for clarification when you get the chance. There’s some flexibility here in this scenario for people who are traveling, those who are in a health rehab facility and need a little bit more time to regain their strength so that they can attend the redemption appointment — because NO, someone cannot have another person attend their appointment on their behalf. It will not work that way. (As I’ve said many times before, if you’re in a group that is awaiting private contact, you are welcome to disregard this post because it wouldn’t apply to you, per se.)
- Also, while I’m at it, let me add this — when you call the number and/or respond to a Safe Link website (??) and you get to speak to someone, if there are special extenuating circumstances for you, let them know.
- Are you Handicapped? Need assistance? They will provide it. No vehicle and no transportation to get there? It’s foreseeable that they could possibly send you money for hiring a driver. Bedridden? Unwell and unable to leave your home? They may even be able to send someone to your home. Just ask.
- Disclaimer: I’m not a financial advisor. I’m not responsible for the financial decisions others make. Everyone is encouraged to do their own research and make decisions based on what feels best for you.
JUDY NOTE, 3 AUGUST
Judy Note: On Sun. 30 July the gold/asset-backed currency of the Global Currency Reset was launched, effectively sinking the fiat US Dollar.
WARNING: There were reports that some were asking you to hand over your foreign currencies and/or Zim Bonds to them saying they would exchange or redeem them for you. DO NOT give in to this scam. Only the purchaser of the currency or bond can legally exchange or redeem that currency or bond at a Redemption Center for the higher rates. Exceptions were that if you had given someone currency or bonds, along with a notarized gift letter saying you did so, or if you gave someone Power of Attorney over your affairs. The bottom line: If someone tried to turn in your currency or bonds without your authorization, they could be arrested.
Global Currency Revaluation:
- Wed. 2 Aug. MarkZ: “I’m guessing it will be Monday 7 Aug. for us. …We are still hearing that money is supposed to be positioned for this weekend. We shall see. There are a lot of bond folks –even outside Asia that are moving right now. … I know a number of very connected people who are traveling to be in place by Fri. 4 Aug.”
- Tues. 1 Aug. Bruce: Funds would be released Wed. evening 2 Aug. and Thurs. 3 Aug.
- Tues. 1 Aug. Captain Marvel Jr.: “Received word that the EBS could go off any time between now and the end of the weekend.”
- On Sun. 30 July Russian President Vladimir Putin announced the Global Currency Reset and on Monday, signed a digital ruble bill into law, approving the use of its central bank digital currency for payments starting from Aug. 1, 2023.
- Mon. 31 July Bearded Patriot: “Just got off a call and can confirm that the first wave of liquidity starts Tues. 1 Aug. There were multiple steps regarding the payout pecking order: Beneficiary Accts, Fines & Penalties, Whales, etc. There were an extreme amount of funds and groups that needed to get paid. It will take a few days. Once it’s starts nothing can stop it. Iraq’s desire was to have this completed and published in the Gazette on Sat. 5 Aug.”
- Mon. 31 July Ranga Rao Konuganti Tom RV/GCR Updates: “Money is moving, large amounts from Singapore to the Philippines, from the Windsor Fund (one of the top six global collateral accounts) to the Chinese Elders, so that they can execute the Financial Transition.”
- Sun. 30 July Texas Snake: Text received 10:10 this morning from a Banker: “All indications are from high sources is that this coming week will have positive news in light that all 209 countries have approved the required protocols. So will advise ASAP after I receive the news.”
- Sun. 30 July Wolverine: “Very early today I received Intel from a very high Contact. I can’t tell you what they said other than things are progressing. Everything is ready. It won’t happen today but we may have very good news this week.”
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