Just some alternative thoughts that are sort of nuanced, but no one talks about for some reason:
1) Synthetic ETFs could pose serious problems and most investors are not familiar with the difference between them and physical ETFs nor are they aware if they even have them in their portfolio. This is a quick read that summarizes part of the problem:
2) How do you choose the correct ETF. How do you choose between emerging markets nd US, etc. Picking a broad market ETF is probably safest, but there is even a variety of those with different features.
4) Compared with no load funds, ETFs can be expensive due to trading fees. Obviously if you buy and hold great quantities of money it isn’t an issue, but it should be considered in your investment.
Presumably patio11 is talking about both, and if he isn't, many people who read this will assume he is. The tracking error issue can still come up with index funds, the differences between them are minimal:
1) Synthetic ETFs could pose serious problems and most investors are not familiar with the difference between them and physical ETFs nor are they aware if they even have them in their portfolio. This is a quick read that summarizes part of the problem:
http://www.ft.com/intl/cms/s/0/4407fb24-edc4-11e0-a9a9-00144...
2) How do you choose the correct ETF. How do you choose between emerging markets nd US, etc. Picking a broad market ETF is probably safest, but there is even a variety of those with different features.
3) Tracking Error can cause ETFs to outperform or underperform by huge amounts on occasion. This article refers to Vanguard’s telecommunications services ETF which underperformed by 5.7%! http://www.investopedia.com/articles/exchangetradedfunds/09/...
4) Compared with no load funds, ETFs can be expensive due to trading fees. Obviously if you buy and hold great quantities of money it isn’t an issue, but it should be considered in your investment.