Financial cage match: ETFs versus mutual funds

Homemade Enigma machine

I want everyone to be an investing expert. Thankfully, I also believe that simplicity in investing is best. Create a Roth IRA, put money into low-cost index funds, and repeat this every month.

When I say “low-cost index funds”, I’m talking about a special class of mutual funds. These are no-load, passive funds, designed to track a collection of companies. One of the most famous collections is the S&P 500, which is based on the market capitalizations of 500 large companies in the U.S.

But if you wanted to buy into a fund that tracked the S&P 500, there is more than one way to do it.

What I’ve always talked about is buying mutual funds. A mutual fund is defined as:

[A] type of investment company that pools money from many investors and invests the money in stocks, bonds, money-market instruments, other securities, or even cash.

But there is another investment vehicle that allows you to purchase the exact same kind of securities, but in a different way. They are called “exchange-traded funds” or ETFs.

I can give you the official definition of what an ETF is, but I’ll warn you, it’s pretty opaque.

The more important question is: do you invest in mutual funds or ETFs? Or both?

It’s time for another financial cage match!

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Is it time to turn off the news?


My mom assures me that this is a true story. Around the age of 5 or so, reflecting on the content on the local news show on TV, I asked my mom why they didn’t call the show “Bad News” instead of just “News”.

I’ve been traveling for the last two weeks, so my daily routine has been heavily altered. One of my routines is to check in with some news websites. New York Times and Washington Post are my staples, but I tend to add Al Jazeera and Fox News for some additional color. (Diversification is a good thing, right?)

But I hadn’t checked in for a while.

I was still checking my mail occasionally (especially for those who write me here). And of the various mailing lists I was on, I started to notice a trend. Paraphrasing, I received emails like: “We are deeply saddened and horrified by these tragic events.” “We will be observing a moment of silence today.” “I know you are struggling with what happened in the same way that I am…

What in the world happened? Or rather, what happened in the world?

I later looked up the events, and was as horrified as one would expect. But it did get me to thinking about the role of media and news in our lives.

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A photo finish is a good thing when budgeting


If you’re like me, you may procrastinate, but you don’t like it. You don’t enjoy waiting until the last minute to get things done.

And in general, it feels better to have some leeway, rather than cutting things close.

However, when it comes to making a plan for your money, you actually do want to cut things close. And this can cause some discomfort until you know to manage it.

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Does savings count as a bill or an expense?

Falling sand grains

I talk a lot about making plans for spending money, because you want to spend your money intentionally and not just let it happen. Moreover, the objective is not to spend as little as possible, but just the right amount to achieve your goals. (People forget this part, thinking that spending less is intrinsically a good thing.)

If you think solely about the bills you need to pay all that counts as expenses, you may be wondering: “Where does savings happen in the plan?

I get this question a lot, and it’s a good one. It’s good because it means that people are thinking about savings, and also, it’s got a straightforward answer.

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Would I have done college differently if I had wanted to avoid debt?

Lightning in the desert

I’m annoyed when I think about debt. It’s a thing that I want to get away from, like a snoring person in the room, or a screaming baby on the plane. I want it gone.

When I was in high school, debt wasn’t something I thought about. I went to college and took out student loans, because that was “just what you did”. (Ugh.)

I was very fortunate in that my parents took out some loans along with mine, so we split the cost, but I had plenty of my own.

Years went by and I started going steady with my student loans. They were my partner, my companion in life. I thought this was also “just what you did”.

And then one day, I realized that there is no such thing as good debt. (Even a mortgage isn’t good debt, and I am going to get rid of mine as soon as possible.)

I have not enrolled in higher education since this realization, so I’ve never had the opportunity to try to attend school while hating debt.

But you may be in a different position. You may be reading this and looking at higher education. And wondering if it’s possible to achieve it without going steady with Sallie Mae forever.

So I’ve been thinking about what would I have done.

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Is it a good idea to get your student loans forgiven?

Spiral windows

Like approximately everyone, I graduated college with student loans.

If there was a way to get my loans “forgiven”, no one told me. At the time, all I knew was that I had to either pay what I owed, pay interest only, or ask for a temporary forbearance (which I did on occasion when times were particularly tough).

These days, though, with the twin perils of income stagnation and runaway tuition, student loan forgiveness is definitely more on people’s minds. Right now, in the U.S. the current plan in place is called the “William D. Ford Direct Loan Program” but is more commonly known as the “Obama Student Loan Forgiveness” program.

There are numerous options for how to pay back your loans these days. But what’s most interesting to me is that there is an option for loan discharge after a period of time, typically after 20-25 years. What you haven’t paid by that point, you won’t have to pay ever.

How did this miss my attention?

While the idea of debt forgiveness is certainly appealing, we need to look at the larger picture to see if it’s actually a good idea.

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Is it a good idea to have an “Adventure” expenses category when traveling?

Top of the mesa

If you’ve read this site for any length of time, you know how about you can obtain best results with your money by tracking your expenses. Moreover, if you categorize your expenses, you can learn even more about how you spend your money, which can lead to making better, more informed choices. (And most likely you’ll spend less as well, without even trying.)

When I talked about how to track your expenses while traveling, I mentioned that one of the tactics I sometimes employ is to use a separate “Adventure” category, one that encompasses everything that you are likely to do while traveling: food, lodging, events, whatever.

You might be surprised to find such a category in my list. After all, isn’t a “catch-all” category kind of antithetical to the whole “categorizing” idea? Why not just have a “Life” category?

But I believe there are reasons why you may want to sometimes use such a category.

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A quick primer on obtaining and using foreign currencies when traveling

The Exchange

As I mentioned about tracking expenses when traveling abroad, other countries don’t use US dollars. (I’m joking about this being notable, of course.)

But switching between currencies presents some extra challenges and requires extra awareness to prevent getting burned with fees. So if you’ve got international travel coming up, and especially if you haven’t done much of it, you’ll want to do a little bit of research beforehand. Start here.

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How to keep track of your expenses while traveling

Adventure silhouette

Another question that was asked after a recent meeting of the Portland Integrative Finance Community was regarding expense tracking and traveling, namely:

“How do you overcome the challenges of tracking expenses while traveling?”

Ooh, another great question! Gosh, if the PIFC keeps growing, I’ll never need to think of post ideas again!

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What to do when you have extra category money at the end of the month

Blue corner

At the most recent gathering of the Portland Integrative Finance Community (join for free here), we had a frank and engaging discussion about the challenges and the benefits of tracking your expenses each and every month, something I’ve done for years and espoused on this site over and over.

But just saying “track your expenses” is the beginning of the story, and there are plenty of questions that come up when figuring out exactly how to do this. (This is one of the topics that I cover through financial coaching.)

And one of the questions I was asked after the meeting was:

“What do you do when you have unspent money in a category at the end of the month?”

Good question.

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