That it is possible for mutual funds to equal the original virtues of ETFs is evident at the US fund company Vanguard, which offers both ETFs and mutual funds.
Here is a sample of funds with identical holdings and thus returns, apart from fees. In fact, the ETFs of Vanguard are merely a share class of the same asset base.
- US Total Stock Market ETF (symbol: VTI) - MER 0.09%
- US Total Stock Market Index Fund (VTSMX) - MER 0.18% no purchase or redemption fee
- US total Bond Market ETF (BND) - MER 0.14%
- US Total Bond Market Index Fund (VBMFX) - MER 0.22% no purchase or redemption fee
- Emerging Markets ETF (VWO) - MER 0.27%
- Emerging Markets Fund (VEIEX) - MER 0.39% plus purchase fee 0.50% and redemption fee 0.25%
The big problem for Canadians, of course, is that Canadians are not allowed to buy US mutual funds.
To its credit, one Canadian ETF provider - Claymore Canada - has adopted useful mutual fund features by offering pre-authorized chequing contributions (PACC) for buying its ETFs, along with a DRIP and a systematic withdrawal plan (SWP), all at no transaction cost. And all of BMO'sETF family new offer DRIP as an option, though not the PACC and SWP (yet?).
If only some mutual fund visionary in Canada would catch up to good aspects of ETFs ....