In this course
1 Introduction
2 What Are Exchange-Traded Funds?
3 How Do ETFs Work?
4 The Pros of ETFs
5 The Cons of ETFs
6 Are ETFs for You?
7 Do ETFs Perform Better?
8 Conclusion
Quiz
Course Catalog
Course 403: Exchange-Traded Funds

Are ETFs for You?

To figure out whether an ETF or fund might be better for your situation, use Morningstar.com's Cost Analyzer.

Let's take an example. Say you have $5,000 to invest. You plan to add $50 dollars to the investment every month, and hold this investment for at least 10 years.

We entered the following information into Morningstar.com's Cost Analyzer:

  • Initial investment = $5,000.
  • Monthly investment = $50.
  • Expected return = 10%.
  • Time horizon = 10 years.
  • We entered the tickers for Vanguard 500 Index VFINX and the SPDR SPY.
  • There's no commission to buy Vanguard 500 Index, but we have to pay an $8 commission when we buy the SPDR. So we entered $8 under Commission $ for the SPDR.
  • We clicked Show Comparison.
Which investment is the better choice for this situation? See what Cost Analyzer says here.

Go ahead and change the inputs, if you'd like, to reflect a different time horizon, investment amount, expected return, etc., and see if the results change. Or enter your own situation and see what Cost Analyzer says.

Next: Do ETFs Perform Better? >>
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