Mutual funds are having a hard time competing with ETFs within the same family.
That’s according to SmartMoney reporter Daren Fonda who looks at Vanguard and State Street as examples in the article Sibling Rivalry: Mutual Funds vs. ETFs.
Mutual funds are a tougher sell because they charge higher expenses than their ETF cousins. For example, Fonda points out that Vanguard recently launched the FTSE All-World ex-US Small Cap ETF (VSS) with an expense ratio of 0.38%. Expenses for the Vanguard mutual fund that tracks the very same index are 32% higher at 0.60%.
Fonda’s example from the fixed income world is State Street’s SPDR Barclays Capital Aggregate Bond ETF (LAG) which carries an expense ratio of 0.13%. That compares to the similar, but actively managed, SSGA Bond Market Fund (SSBMX) with an expense ratio of 0.50%.