ETFs vs. Mutual Funds

ETFs Charge Lower Fees

ETFs Help Investors Benefit More from Performance. ETF investors pay a mere fraction of a percentage point in management and administrative fees, usually several times lower than most actively managed mutual funds.

The chart below shows the edge that an ETF with lower fees and expenses has over an index fund during a 10-year period, assuming a lump-sum investment of $10,000 with an 8% annual rate of return after fees and expenses. Investors in the iShares ETF would have reaped an extra $191.74 over the Vanguard index mutual fund, or an extra $1,169.23 over the AIM index mutual fund, at the end of the period.

Fund Symbol Annualized Return (%) Exp. Ratio (%) Total Costs ($) Final Value ($)
iShares S&P 500 Index Trust ETF IVV 8.0 0.09 *193.73 21,395.52
Vanguard 500Index Fund VFINX 8.0 0.18 385.47 21,203.78
AIM S&P 500 Index Fund ISPIX 8.0 0.65 1,362.96 20,226.29
*Assumes $10 transaction fee.
Source: Richard Diennor, Standard & Poor's Fund Advisor
Taken from: "ETFs: It's About the Fees", Business Week, Feb 10, 2005
FINRA Mutual Fund / ETF Fees and Expenses.

Even small differences in expenses can make a big difference in your return over time.*
For example, let's say you invest $10,000 in two funds with annual returns of 10%. Fund A has total annual fund operating expenses of 0.18% and Fund B has expenses of 0.9%. Fund A, the lower expense fund, will grow to about $165,313.20 in 30 years. Fund B will only be worth $133,042.44. - a $32,270.76 difference.*

NASD Chart - Even small differences in expenses can make a big difference in your return over time.

To see how fees might impact your long-term performance, use the Finra Mutual Fund and ETF Expense Analyzer.

*Source FINRA: Fund Analyzer Terms and Conditions   Disclaimer

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