Tags: Hulbert | ETF | funds | computer

Hulbert: Check Out These Index Funds with Low Expenses

Tuesday, 14 May 2013 08:03 AM

By Dan Weil

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Trading stocks isn't a good way for investors to make money, says Mark Hulbert, editor of Hulbert Financial Digest.

Instead, stick to low-cost index funds, he writes in The Wall Street Journal.

"Don't trade. Short-term trading has become so dominated by Wall Street's computers that individuals — and professional managers — almost certainly will lose out to them over time," Hulbert says.

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"Individuals are no longer playing against Grandmasters; they're playing against Deep Blue," Terrance Odean, a finance professor at the University of California, Berkeley, he tells Hulbert, referring to the famous battle in the 1990s between chess Grandmasters and IBM's supercomputer.

Individual investors "will almost certainly lose," he adds.

"The obvious alternative, experts say, is to buy and hold diversified index funds with very low expenses," Hulbert notes

Hulbert suggests looking at several funds:

iShares MSCI ACWI Index Fund (ACWI). This exchange-traded fund (ETF) gives you global coverage as it's tied to the MSCI All Country World Index. It has an expense ratio of 0.34 percent.

• For U.S. stocks, there's the Vanguard Total Stock Market (VTI) ETF. Its expense ratio is only 0.05 percent.

• For U.S. bonds, there's the Vanguard Total Bond Market (BND) ETF, which has an expense ratio of 0.1 percent.

• For stocks of developed nations overseas, there's iShares MSCI EAFE Index (EFA) ETF, with an expense ratio of 0.34 percent.

• For commodities, there's the iShares S&P GSCI Commodity-Indexed Trust (GSG) ETF. Its expense ratio is 0.75 percent.

But beware, says Roger Wohlner, a financial adviser at Asset Strategy Consultants in Arlington Heights, Ill.

"Over the past several years many new index ETFs have come to market, and increasingly many are based on questionable benchmarks with only back-tested 'history' to give investors a hint at the previous performance of the indexes that underpin these new funds," he writes in U.S. News & World Report.

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