Markets
SPY

ETFs vs. Mutual Funds, Rising Rates, Market Volatility & More

An image of a pen, a tablet and a calculator
Credit: Shutterstock photo

  • (1: 00 ) - How To Choose Between VOO & VFIAX: What Is The Difference?
  • (4: 10 ) - Why Investors Should Not Time The Market
  • (6: 20 ) - How To Protect Yourself From Rising Rates
  • (9: 00 ) - When Could We See A Zero Fee ETF?
  • (12: 05 ) - Episode Roundup: Podcast@Zacks.com

In this episode of ETF Spotlight, I talked with Dr. Derek Horstmeyer, assistant professor at George Mason University School of Business. Dr. Horstmeyer is a regular contributor to the Wall Street Journal. His research focus areas include ETF & mutual fund performance.

We started with a question that I get frequently from our clients: Should they pick an ETF over a similar index fund?

ETFs are not a lot different from passively managed index funds. They however do offer better transparency, intra-day tradability and tax efficiency.

Dr. Horstmeyer studied the performance of 66 matched ETF/mutual-fund pairs --those with the same holdings and objectives-and found that "if an investor wants to buy and hold an ETF or mutual fund for more than a year, then in general the ETF will make better sense financially than the mutual fund."

We then discussed market volatility and investor behavior. Dr. Horstmeyer discussed behavioral inefficiencies in a recent WSJ article . His research found that investors lose about 1 to 2 percentage points a year because they tend to pull their money when the market is near a bottom.

Investors should stay focused on their longer-term investing goals during periods of market volatility as trying to time the market is usually a futile exercise.

Fear of rising rates is one of the main reasons for this sell-off. Dr. Horstmeyer studied the performance of stocks during periods of rising interest rates over the past 30 years and found that stocks continue to do well if the Fed raises rates to keep the economy from overheating.

We discussed how investors can protect their portfolio against rising rates. Small-caps and growth stocks outperform their safer counterparts during rate-increase cycles.

Finally, we talked about the fee war in the ETF and mutual fund space. Dr. Horstmeyer had written in February: Zero-Fee ETFs (or Even Negative) Are on the Horizon .

Fidelity recently launched four zero-fee index funds. Should we expect to see a zero-fee ETF soon? Find out on the podcast.

Please visit https://www.derekhorstmeyer.com/ to learn more about Dr. Horstmeyer's research.

Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email podcast@zacks.com .

Want key ETF info delivered straight to your inbox?

Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

VANGD-SP5 ETF (VOO): ETF Research Reports

ISHARS-SP500 (IVV): ETF Research Reports

SCHWAB-US BR MK (SCHB): ETF Research Reports

ISHARS-1500 IDX (ITOT): ETF Research Reports

SPDR-SP 500 TR (SPY): ETF Research Reports

Get Your Free (VFIAX): Fund Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SPY ITOT IVV SCHB VOO

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More