Vanguard has entered the trading fee fray and will be offering free trades of its own ETFs via the Vanguard brokerage unit. If you already use them it is a nice benefit and new folks could create a solid portfolio based on some of the lowest fee ETFs around. Read Article
Morningstar.com is reporting that Schwab has filed the paperwork for eight new ETFs. They expect that they will offer similar coverage as a number of current funds but will have much lower expenses. Once released you may want to compare these funds with similar funds you hold and see if you can reduce your expenses while maintaining the coverage you have. It looks like Vanguard will be the toughest competitor at the listed expenses.
Read the full article here.
Recently, thestreet.com did a two-part series on what they currently consider the best ETFs. As well as this series they also link within the article to a previous article about what they consider the most dangerous ETFs for buy-and-hold investors. The series are both worth your time to read. You may get some insight about an ETF to consider either getting in to or perhaps a position to reduce or eliminate.
There is plenty of history about how dividend reinvestment can help an investor capture great returns. Some examples of possible returns can be found here and here. I believe that dividend reinvestment is a very smart way to go up until the time you need the income stream. I’m not so sure about individual DRIPs though unless you want to just set-it-and-forget-it or don’t hold any ETFs or CEFs.
Due to the way ETFs and CEFs trade they have the the ability to trade at a premium or discount to the actual Net Asset Value (NAV). Because of this I believe that an investor who takes an active role in the direction of their account can do better than a DRIP.
Let’s just say that you are the type who only peeks into your account once a quarter. You check your account in October and have your dividend cash sitting idle in your account. Let’s also say that you hold two of my favorite funds: AOD and AWP. As of today AOD is trading at a 21% premium while AWP is at an 18% discount. If reinvesting today you will get more value for your money buying the fund that is trading at less than the NAV. In fact, there is quite a spread between these two and AWP would be a much better value. Repeating this check each time you want to deploy your funds should yield better returns than simply plowing your money back to the original source every time.
You can also use this method to re-balance your portfolio in a way. You can divert your dividends into whichever fund or asset type you want to grow in oder to shift the balance. That way you don’t have to sell a great asset to boost a different asset class. This may not work fast enough for you as you get ready to retire but is a nice way to adjust leading up to that point.
What are your thoughts?