Investing - Theory, News & General • Barrons: Jack Bogle was right about ETFs

The Barron's article seems to be based on a M* article from about a month ago? M* puts out "mind the gap" articles regularly about the measured difference between time-weighted and cash-flow-weighted returns for various classes and catagories of funds. Last month in one of those mind the gap articles, buried deep in the article and not really remarked upon, was their finding that the cash-flow-weighted returns of etf index funds had trailed the cash-flow-weighted returns of traditional index funds by about 1%. I don't know if the shortfall is due to advisors, but that shortfall between time-weighted and cash-flow-weighted returns is always due to trading.

When I read the M* article, this thread's title was what went through my mind at the time. Oh, isn't this what Bogle was going on about all those years ago: etfs being easier to trade means its likely people will trade more, and that will be detrimental to their returns---even if they're etf index funds. What was Bogle's colorful analogy, exquisitly crafted shotguns are meant to be used to hunt, but they can also be misused to blow your brains out.

If there's any lesson to learn, it's the one we all already know: staying the course and not trading is likely to always be your best bet. And that doesn't change if you're using exchange traded index funds.

Statistics: Posted by asset_chaos — Wed Sep 11, 2024 10:11 pm — Replies 20 — Views 2629

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