@catch22 correct, one may purchase 1 share, but personally, I purchase in lots of 100. Schwab offers some NTF ETFs and if I bought those incrementally, that would be acceptable, but to pay $8.95/1 share of XYZ x 100, in order to scale in??? No, thanks.

Hi @little5bee
You noted: "The main reason I don't like ETFs is that they require a sizable investment all at once"
Which etf requires a sizable investment beyond the price of the etf "share" at the time of purchase? In effect, one may purchase 1 share, yes?
Thanks.
Catch

Thank you for clearly enumerating some of the issues with ETFs. (Though the hidden cost of NTF platforms is orthogonal - that's a problem with the platform regardless of the vehicle, ETF or OEF - and one that doesn't plague most ETFs.)
A couple of smaller downsides of ETFs:
4. Non-commission trading costs - the bid/ask spread and the (petty) SEC Section 31 fee (currently 0.184 basis points, usually passed through to investors by brokerages).
5. Tracking error - this is the "mini" version of your #2 - structural pricing issues. Even when the market isn't in free fall, there is a divergence between NAV and trading price, due in part to liquidity costs (and I guess also due to the fees that authorized participants pay to the sponsor to buy and sell creation units). This is different from the tracking error of the fund with respect to its benchmark index, which is inherent in all index funds.
On the plus side, ETFs may be more tax-efficient than their OEF counterparts. Only "maybe" for a couple of reasons. One is that well run cap weighted index funds rarely distribute capital gains, regardless of the funds' structure. The other is that Vanguard OEFs share the same advantage as their sibling ETFs, because they are merely different share classes of the same portfolios, not clones.
I completely agree with you regarding S&P indexes (not so for Russell, Wilshire, FTSE). This has been obvious since 2000, when S&P methodically swapped out "old economy" stocks for "new economy" stocks, just in time to see its index (supposedly a measure of market performance) underperform the market by several percent.
http://www.thestreet.com/story/10029393/1/the-sp-500-is-a-mutual-fund--and-a-bad-one-at-that.html
Finally, a note on the CNBC link - Usually, when an article is written saying how wonderfully cheap ETFs are, it gives an "average" equity OEF ER of somewhere around 1.3%. That's an unweighted average and a rather silly figure. Since the purpose of this article is to show how expensive (some) ETFs are, it did the opposite, and gave the dollar weighted average ER of 0.70%. A much better figure IMHO, but without labeling, it seems chosen more to support the thesis than to be objective. (Since no one really cares what numbers mean, let's just pick the "best" one for our point.)

It's widely known that having managers deeply invested in their own funds is good for their shareholders. There's nothing that focuses a manager's mind like the prospect of losing vast chunks of his or her own money. Also demonstrable, but less widely recognized, is the fact that having a fund's independent trustees deeply invested in the fund also substantially improves a fund's risk-return profile. It turns out that trustees don't like losing money or paying taxes, so they become particularly aggressive when their fund managers engage in behaviors that lead to such outcomes.
A relatively new study puts two interesting twists on the old story. Martin and Sonnenburg find (1) that a substantial increase in the amount that a manager has invested correlates with about 1.6% higher alpha in the succeeding year. So far as I know, no public source releases information on changes in a manager's level of investment. And (2) the increased alpha occurs even when the investment just reflects a fund company's mandate. That is, finding #1 isn't necessarily about market timing or confidence. If a fund company requires substantial and ongoing investment by their managers, performance improves.
My preference, of course, is that every single employee of the adviser and every trustee have substantial skin in the game. As one manager put it, "it's one thing to be invested in your own fund. It's another to have your mother invested. And it's an entirely different level once your mother-in-law is investing with you."
David

Dear friends,
As you know, I hold ETFs in the same regard as I hold, say, tasers in the hands of toddlers. Charles is, I know, far more hopeful of their potential for good. It might be selective perception on my part, but it seems as if there have been many more skeptical essays about them since the Monday crash than I'd seen before.
One argument that the term "passive investing" is a marketing fraud. John Rekenthaler does a nice job of pointing out that "passive/active" is not a simple split. There's a spectrum from truly passive (a cap-weighted broad market index) through covertly actively ("smart beta" and rules-governed active ETFs) toward more active (most "active" funds) to most active. I believe that even John's "passive" category is "active but lethargic." The S&P 500 is an actively managed quant fund whose the managers are employed by Standard & Poor's. They decide who gets in based on a combination of arbitrary rules, from market-weighting to float, profitably and market cap criteria. As a simple example, Avon was booted after 50 years. Why? Market cap was too small. It was then replaced by Hanes. The minimum cap is $4.5 billion, Avon was $3.2 billion, Hanes was $13 billion. So Hanes, a large and profitable firm, has been sidelined for years waiting for another firm in its industry sector to shrivel and get ejected. If Hanes was more representative of the market, should it have been added years ago? Maybe, but the rules say ... Should Berkshire Hathaway, excluded until 2010, have been added decades ago? Maybe, but the rules say ...
The prime arguments against ETFs seem to be:
1. their cost advantage is illusory. The fact that some ETFs are spectacularly cheap leads investors to assume that all are, which reduces their vigilance as they select investments.
2. they are structurally flawed. The uncoupling on market price from NAV during the crash was one signal of that. A recent article on hedge funds' strategies for gaming the ETF market is another.
3. they structurally encourage bad investor behavior. I smile whenever I read advocates list ETF's "advantages," one of which is always "easy to trade, like a stock." Uhhh ... right, but trading is bad for everyone except those who make money executing your trade.
I read two interesting essays this morning that add a bit of useful evidence to the discussion.
The Hidden Costs of Commission-Free ETFs lays out the costs of getting on platforms like Schwab and into their NTF programs. Schwab charges ETF advisers an $250,000 "shelf fee" plus 40 basis points to participate in the program. As a result, NTF funds including commission-free ETFs end up charging higher expenses. For every $1,000 you invest, you end up paying $2.20 more in annual expense for commission-free ETFs than for commissioned ones. If the commission is $9/trade, the break-even point is about $4,000 for a fund/ETF held one year; that is, if you intend to invest more than $4,000 and hold it for more than one year, you lose money with C.F. ETFs.
Most absurd ETF trade of all argues that about one-quarter of ETFs charge, before commissions, as much as or more than the average active mutual fund. Some of the data struck me as interesting, though the conclusion didn't. It strikes me as silly to compare ETFs with niche missions (that's typical of the high cost ones) against mutual funds with non-niche missions. Still, the cost warning seems worth it.
For what interest that holds,
David

I'm always looking for yield, but I'm at my limit with respect to risk tolerance, where I'm at right now. I've held PREMX since 2010, and was late for the 2009 run-up. In the 5 years that have followed, it's paid me handsomely while I reinvest everything. Yes, that is EM, not HY. I read the article which included the reference to TRP HY fund and like the rest of you--- I did see--- divorced from the reference, further down, that the fund is closed. A global substitute was offered. Noted already, above, in this thread.
In my portf, PRSNX is 11.46% of total. PREMX = 14.43%. DLFNX = 2.7%...... Then, there are also bonds being held in my PRWCX and MAPOX. Just threw some money at MAPOX. (IRA.) I'll be throwing more money at MAPOX, soon, again.

Bought some junk today (LBNDX) ... adding to my current position.
And, added to my bank loan (floating rate) fund (GIFAX) yesterday.
This increases my income sleeve form about 8% of my overall portfolio to about 10%.
Old_Skeet

Andy - point taken.
Heezsafe, HYG was up today (10/5) +1.20%. By Gundlach's own admission, he is now looking at buying junk... Correct?

Rereading (carefully) the August 31, 2015, prospectus for GPROX (which I own). Under "Principal Investment Strategies": the fund may invest up to 90% of its total assets (under normal market conditions) in micro cap companies, those with market caps below $1 billion. (My bold.)
The fund may also invest up to 50% (under normal market conditions) of AUM in emerging and frontier markets.
I'll have to spend a few days figuring out whether it is worth it for me, a small retail investor who is not a trader, to also hold GPMCX.

Maybe just do it like Congress. For example:
"TITLE I—Reauthorization of FEMA and Modernization of Integrated Public Alert and Warning System
SEC. 101. Reauthorization of Federal Emergency Management Agency.
Section 699 of Public Law 109–295 (6 U.S.C. 811) is amended—
(1) by striking “administration and operations” each place it appears and inserting “management and administration”;
(2) in paragraph (2) by striking “and”;
(3) in paragraph (3) by striking the period at the end and inserting “; and”; and
(4) by adding at the end the following:
“(4) for fiscal year 2014, $972,145,000;
“(5) for fiscal year 2015, $972,145,000; and
“(6) for fiscal year 2016, $972,145,000.”.
...."

Hi @Old_Joe
To start the ball rolling for proper business functions; I would "drop" them an email and help them be aware that this "poor book keeping methodology", which reflects poorly on their credibility has been "noted" before several 1,000's of investors on the internet.
Perhaps they are not fully aware of the broader implications of this media (here) and in particular "social media".
Ya, pretty sad OJ. An addendum to the original would really do the trick and likely reduce their production costs, too.
Take care,
Catch

Qtr4 of 2008 was not a season of gumdrops and lollipops for junk bond funds as well. That's two of the last seven (28.6%). I suppose things may yet turn around in Qtr4 2015, but as Gundlach remarked in the Reuters phone chat I posted this a.m.:
"I'll think about buying [junk bonds] when it stops going down every single day."

Funds | Mon Oct 5, 2015 10:13am EDT
By Lawrence Hurley
Oct 5 (Reuters) - The U.S. Supreme Court on Monday left intact an appeals court decision that allowed a financial adviser to sue Charles Schwab Corp over allegations that the brokerage firm deviated from objectives set for a mutual fund, costing investors millions of dollars in losses.
The court rejected Schwab's appeal of a March ruling by the 9th U.S. Circuit Court of Appeals that revived the lawsuit.
The..court said Northstar Financial Advisors Inc could sue on behalf of its clients and that Charles Schwab should face claims of breach of contract over the alleged losses in the Schwab Total Bond Index fund.....plaintiffs said that by investing more than 25 percent of assets in non-agency mortgage securities and collateralized mortgage obligations, Schwab portfolio managers ignored the fund's fundamental investment objectives of tracking the Lehman Brothers U.S. Aggregate Bond Index and avoiding big industry bets.
They said this caused the fund to lag its benchmark from Sept. 1, 2007, to Feb. 27, 2009, losing 4.80 percent while the index posted a positive total return of 7.85 percent.
http://www.reuters.com/article/2015/10/05/usa-court-schwab-idUSL1N12512920151005

Emerging Markets Webcast
It is scheduled for: Tue, Oct 6, 2015 1:15 PM PDT
"Emerging Markets Outlook:
A Cautious Road Ahead"
Please join us for a live webcast titled "Emerging Markets Outlook: A Cautious Road Ahead" hosted by:
Luz Padilla
Luz Padilla, Director of Emerging Markets Fixed Income, will provide an update on emerging markets in additon to discussing the strategy, sector allocations and outlook for the DoubleLine Emerging Markets Fixed Income Fund (DBLEX / DLENX) for 2015.
Register
http://go.pardot.com/e/103892/starthere-jsp-ei-1051157/fg9n/1335787
http://performance.morningstar.com/fund/performance-return.action?t=DLENX&region=usa&culture=en_US

Bloomberg has a decent article on the reasoning behind the SEC's liquidity management proposal.
When you sell your fund shares, you're supposed to get the day-end NAV and the fund's supposed to cut you a check within a week. In recent years, funds have seen the challenge of earning something as greater than the challenge of remaining fully liquid. As a result, more funds have moved into investments that might turn into roach motels: each to get into, impossible to get out of. Those include below investment grade debt, private placements, some derivatives and illiquid investments in general. That's compounded by the move to passive products that maintain near-zero cash levels.
The SEC research found that liquid alts funds face a greater prospect of a liquidity crunch than most, since their investors have a greater tendency to sell en masse. (Data's in the article.)
The SEC proposes requiring that each fund analyze its portfolio, determine the potential magnitude of quick outflows in a crisis and maintain enough "cash or cash-like investments that can be sold within three days" to be able to handle redemption demands without exacerbating a crisis by trying to sell illiquid positions into a market where everyone else is already trying to do the same.
The Investment Company Institute scoffs at the very idea of a challenge to the easy grandeur of the industry they're paid to represent.
Two interesting implications: (1) liquid alt funds might have to become dramatically more liquid but also (2) ETFs might no longer be able to remain fully invested. One additional implication: an ETF and an index fund mimicking the same index might not be permitted to carry the same cash level if the redemption patterns in the ETF don't mirror the redemption patterns in the fund.
Worth pondering, perhaps.
David

'Specially like this wording:
Funds would also be prohibited from acquiring any asset that couldn’t be sold within seven calendar days if it would mean that such assets would account for more than 15% of their net assets.
Funds would be required to invest a minimum percentage of their net assets in positions that could be converted to cash in three business days.
Hey........good luck with the above in bold.
Have the investment companies abide with some simple rules as noted in the article. The SEC will legally note to them that a violation or failure of the organization to be "liquid" will result in the "nationalization" of the firm, all employees are terminated and all account assets will be automatically converted to 10 year Treasury issues with notification to all account holders; who may them rotate their funds into another investment company on the "chosen one's" list.
Management, please sign on the line following the X _______________________
None of the above is not unlike the special actions taken during the 2008 melt. Many FDIC institutions have since been terminated and the accounts move to bank "X".
The "gov" can guarantee the whole thing. Tis in the best interest of the country in general.

Yes, andy, I am aware that one year (last year) did not adhere to seasonal patterns. Looking back one year and saying "ah hah!" doesn't negate that seasonal patterns do exist over time. US equities 'on average' have earned +100% of their return between 11/1 through 04/30. In no way does that 'average' return mean that stocks are positive every year. -- It means that from a probability perspective, the odds are greatly in your favor.

Daisy Maxey, writing for the online version of the WSJ, announced "Mutual fund's overhaul hits investors with a big tax bill." It's the same "F P A Perennial becomes F P A U.S. Value" story that we warned people about in June. Remember "F.P.A. Perennial: Time to Go"? Remember: "If you are a current Perennial shareholder, you should leave now"?
Highlights of the story:
Morningstar channeled Bernanke. Ben was adamant that there were no clear signs of trouble brewing in the years leading up to the 2007 implosion. Dan Culloton of Morningstar seemed equally surprised by Perennial's $39/share payout: “It’s certainly a big, shocking distribution. It exceeded my expectations."
Why? In the parallel case of F P A's conversion of Paramount from small growth to large value, virtually the entire portfolio was liquidated within a few months. Morningstar's own data back in June suggested a $36/share payout. The only reason you'd be surprised is if you weren't paying attention. How could Morningstar not ... oh, right. The fund only has $280 million in AUM!
Wall Street Journal practiced "safe" journalism. Two tenets of that strategy. Talk to Morningstar. Avoid hard questions.
"F P A declined comment". Yep. You could sort of feel the temperature drop after we complained about raising the management fee at Paramount when it was converted from a clone to Perennial to a global absolute value large cap. Since that change, perhaps coincidentally, assets are down nearly 50% and the fund is underwater.
(sigh)
David

Doesn't fire-proofing funds reduce the potential return? Can I still invest in a very risky fund if I want to - knowing that increased risk often leads to increased return over longer periods? Do you really want your emerging markets bond fund or small cap equity fund to be as safe and secure as bank deposits (now yielding less than 1%)? Something in me doesn't like all these new rules.
However, if investors refuse to read the prospectus and excercise common sense in their fund purchases - perhaps this is the only alternative. I'd like instead some type of uniform "risk" label applied to all funds sold to the public. 4 or 5 different risk levels should be adequate. This would also give fund companies an incentive to structure their funds so as to qualify for a lower risk rating. Novice investors, those near retirement, etc. would know in advance which funds represented the higher risk of principal loss over the near term and would be cautioned to avoid these.
Many companies do exactly that. T Rowe Price does an excellent job displaying risk using bar graphs and than elaborates on that risk in their fund commentary. Even here, however, I suspect many ignore those classifications and invest more aggressively than prudent for their circumstances.
AAA

I own DLFNX since Sept, 2012. $50 BILLION AUM in DBLTX. That fund oughta be closed. With so much in there, he's driving the market, not investing in it. $50B is nuts. This thread caused me to look once again at the portfolio. DLFNX is 47% in AAA-rated stuff. If I was aiming for a not very risky solid, reliable, tame fund, I guess I found it.
Signed,
----The MFO resident Rank Amateur.

I noticed the quality numbers, too. Still, if 47% is AAA rated, then why is the average quality only BB for the fund? He must own some real junk in there.