SPY vs S&P 500 index fund(VFINX)

[The4Aces]

I was doing some researching on the Vanguard index fund when i came into an artical about SPY (a trust that follows the S&P 500). The artical said that the advantage of SPY is that capitals gains/losses are only taken when you buy and sell the stock. With the Index fund (such as Vanguard S&P index fund you have to pay capital gains/loss when ever the fund sells a share.

For the index fund to still be around there must be some advantages. What are they? why buy the index fund instead of buying SPY.

thanks

[DesertCat]

If you buy and hold an ETF (which I believe SPY is) can be more tax efficient. But the difference is pretty minor in the grand scheme of things. John Bogle (the founder of Vanguard and index funds) wrote a negative op ed piece in the wall street journal. I'll post some quotes separately, but essentially he says that the ease of trading ETFs leads people to trade ETFs, which leads to lower returns than buying and holding.

[iversonian]

I believe dividends flow through to the shareholder. Given that index funds have such low turnover, if you run the numbers, you'll probably find that it's hardly a consideration. In fact, if you reinvest those dividends by buying more shares in SPY and paying commissions, it could be worse overall.

[mrbaseball]

SPY's big advantage is a very large and liquid options maket with very tight bid/ask. If you ever need or want to hedge yourself this is easily done with SPY. Not so with a mutual fund. Plus SPY stock itself is easily tradeable with high liquidity and tight markets.

[pig4bill]

[ QUOTE ]
If you buy and hold an ETF (which I believe SPY is) can be more tax efficient. But the difference is pretty minor in the grand scheme of things. John Bogle (the founder of Vanguard and index funds) wrote a negative op ed piece in the wall street journal. I'll post some quotes separately, but essentially he says that the ease of trading ETFs leads people to trade ETFs, which leads to lower returns than buying and holding.

[/ QUOTE ]

Yeah, I saw him whining about it in a CNBC interview. I don't know why so many people are so worried about how other people trade.

[mrbaseball]

[ QUOTE ]
(the founder of Vanguard and index funds)

[/ QUOTE ]

Well? Maybe he has an ulterior motive [img]/images/graemlins/smile.gif[/img]

[SlowHabit]

[ QUOTE ]
[ QUOTE ]
If you buy and hold an ETF (which I believe SPY is) can be more tax efficient. But the difference is pretty minor in the grand scheme of things. John Bogle (the founder of Vanguard and index funds) wrote a negative op ed piece in the wall street journal. I'll post some quotes separately, but essentially he says that the ease of trading ETFs leads people to trade ETFs, which leads to lower returns than buying and holding.

[/ QUOTE ]

Yeah, I saw him whining about it in a CNBC interview. I don't know why so many people are so worried about how other people trade.

[/ QUOTE ]
Because it's annoying when the media prints false information (well, according to him it's false information)?

A similiar example was when Malmuth went into the HSNL forum and tried to reason that AQ > JJ in certain spots. Of course I don't mind that he gives off this information to the mass since it indirectly benefits me. But if I was another theorian, I'd be pi.ssed/annoyed (especially if Malmuth makes money off the mass via transaction fees).