A reader reports that she had a nice little portfolio of ETFs going, but then started putting money into something she thought was better – TD e-series index mutual funds. Now, she has a question: Sell the ETFs and commit to e-series funds, or find some better ETFs?
We have a classic case here of an investor with a great strategy being distracted by a comparably smart approach for portfolio-building. What to do in this type of situation? Nothing. When you latch onto something that works, stick with it and stop worrying that you're missing out.
Fear of missing out has been an investing trap since forever. People – and, let's not kid ourselves, advisers – pick good stocks or funds, but hear about something they think is better. The risk is that serial buying and selling leaves you with a disorganized mess of a portfolio that deprives you of returns and costs you significantly in terms of trading commissions and fees.
The ETFs mentioned by this reader include some low-cost, widely held funds covering major asset classes. Excellent choices, so kudos to her. TD's e-series are also a good choice. The fees are higher, but you can buy and sell without having to pay the sort of commission that typically apply to buying and selling ETFs.
It's no doubt possible to make projections that both the ETFs and e-series funds would deliver a higher return over the long term. But that's a pointless exercise. Both approaches are effective – pick one and commit to it so you tap into the benefits of a sound, consistent long-term investing approach.
This reader also wondered about finding better versions of the ETFs she already owns. Forget that, too. She already has ETFs that track core stock and bond indexes at a low cost. Almost all of the new crop of ETFs are expensive because they've strayed from the core index-tracking approach to focus on either stock screening or active management.
It might make sense to drop a 5-per-cent weighting in one of these new ETFs into this reader's portfolio, but there's really no need. She got her portfolio at the beginning and there's no need to switch. In investing, change is sometimes bad.