๐Ÿ˜ŽShould the focus only be on mutual funds vs ETF?

16 March 2021

The switch from mutual funds to ETFs is a good thing for investors that will be able to get the best of both worlds i.e. combining active funds added value with passive funds advantages on tax efficiency (in the ๐Ÿ‡บ๐Ÿ‡ธ), cost, liquidity, and distribution.

๐˜๐ž๐ญ ๐ญ๐ก๐ข๐ง๐ค๐ข๐ง๐  ๐ญ๐ก๐š๐ญ ๐ฆ๐ฎ๐ญ๐ฎ๐š๐ฅ ๐Ÿ๐ฎ๐ง๐๐ฌ ๐š๐ซ๐ž ๐จ๐ง๐ฅ๐ฒ ๐š๐œ๐ญ๐ข๐ฏ๐ž ๐ฆ๐š๐ง๐š๐ ๐ž๐ฆ๐ž๐ง๐ญ ๐š๐ง๐  ๐„๐“๐…๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐ฉ๐š๐ฌ๐ฌ๐ข๐ฏ๐ž ๐ฆ๐š๐ง๐š๐ ๐ž๐ฆ๐ž๐ง๐ญ ๐ข๐ฌ ๐š ๐Ÿ๐š๐ฅ๐ฌ๐ž ๐›๐ž๐ฅ๐ข๐ž๐Ÿ. Today mutual funds are comprised of active funds and index funds. And ETFs are comprised of passive ETFs and active ETFs.

Therefore, for a fair active vs passive performance comparison, a reclassification is needed. Active funds should include active mutual funds and active ETFs and passive funds should include passive ETFs and index funds.

๐Ÿ‘‰The switch from mutual funds to ETF is an interesting trend yet it does not remove the need for a fair comparison between true active and true passive strategies. And as says Tom Eckett from ETF Stream in “Peak passive an irrelevant discussion (160321): “Any portfolio has room for both true active and passive strategies”.

Marlene Hassine Konqui