Index mutual funds are challenging exchange-traded funds in the cost arena, according to the Wall Street Journal.

The newspaper cites analysis by Vanguard investment strategist Joel Dickson.

“You hear all the time from fund sponsors that ETFs are less expensive to own than mutual funds,” the Journal quotes him as saying. “But that’s more myth than reality.”

According to Morningstar stats cited by the article, typical mutual funds cost nearly twice as much as an ETF, but these average include actively managed funds which are more expensive.

Dickson argues that a more "apples-to-apples" approach is to compare index mutual funds with ETFs. According to the Morningstar database ETF expense ratios are about 60 basis points compared with 77 basis points for mutual funds bound to an index.

Read more about the subject in the Wall Street Journal. 

Edited by: Tommy Fernandez


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