Comparing ETFs following the same index
The key two things to consider when looking at similar/identical ETFs is the typical (or 'indicative') spread, and the trading volume and size of the ETF. Just like regular stocks, thinly traded ETF's often have quite large spreads between buy and sell: in the 1.5-2%+ range in some cases. This is a huge drain if you make a lot of transactions and can easily be a much larger concern than a relatively trivial difference in ongoing charges depending on your exact expected trading frequency. Poor spreads are also generally related to a lack of liquidity, and illiquid assets are usually the first to become heavily disconnected from the underlying in cases where the authorized participants (APs) face issues. In general with stock ETFs that trade very liquid markets this has historically not been much of an issue, as the creation/redemption mechanism on these types of assets is pretty robust: it's consequences on typical spread is much more important for the average retail investor. On point #3, no, this would create an arbitrage which an authorized participant would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work.
This is great. Thanks! So, just assuming a fund happened to average out to libor plus 50 for a given year, would applying that rate to the notional value of the index swaps provide a reasonable estimate of the drag an ETF investor would experience due to the cost associated with the index swaps?  For instance, applying this to the hypothetical I linked to in the original question, they assumed fund assets of $100M with 2x leverage achieved through $85M of S&amp;P500 stocks, $25M of S&amp;P500 futures, and a notional value of the S&amp;P500 swaps at $90M. So the true costs to an ETF investor would be: expense ratio + commissions on the $85M of S&amp;P500 holdings + costs associated with $25M of futures contracts + costs associated with the $90M of swaps? And the costs associated with the $90M of swaps might be roughly libor plus 50? As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index: You are correct about the first two questions.  At the time it was last measured those were the percent invested in the Basic Materials sector for the ETF and its benchmark.  Note, this ETF will be significantly different from its benchmark as it is an equal-weight index rather than the more common capitalization-weighted index.  Meaning that this ETF could have materially different performance from its benchmark. The third column is the average sector weights of all the ETFs in Morningstar's Large Blend category.  These are ETFs that generally invest in a broad collection of large U.S. stocks and (weighted?) average of all of them will be generally fairly close to the benchmark. Your link is pointing to managed funds where the fees are higher, you should look at their exchange traded funds; you will note that the management fees are much lower and better reflect the index fund strategy. Multiple overlapping indices exist covering various investment universes.  Almost all of the widely followed indices were originally created by Lehman Brothers and are now maintained by Barclays.  The broadest U.S. dollar based bond index is known as the Universal.  The Aggregate (often abbreviated Agg), which is historically the most popular index, more or less includes all bonds in the Universal rated investment grade.  The direct analog to the S&P 500 would be the U.S. Corporate Investment Grade index, which is tracked by the ETF LQD, and contains exactly what it sounds like. Citigroup (formerly Salomon Brothers) also has a competitor index to the Aggregate known as Broad Investment Grade (BIG), and Merrill Lynch (now Bank of America) has the Domestic Master. Multiple other indices also exist covering other bond markets, such as international (non-USD) bonds, tax-exempts (municipal bonds), securitized products, floating rate, etc. "Comparing index funds to long-term investments in individual companies? A counterintuitive study by Jeremy Siegel addressed a similar question: Would you be better off sticking with the original 500 stocks in the S&P 500, or like an index fund, changing your investments as the index is changed? The study: ""Long-Term Returns on the Original S&P 500 Companies"" Siegel found that the original 500 (including spinoffs, mergers, etc.) would do slightly better than a changing index. This is likely because the original 500 companies take on a value (rather than growth) aspect as the decades pass, and value stocks outperform growth stocks. Index funds' main strength may be in the behavior change they induce in some investors. To the extent that investors genuinely set-and-forget their index fund investments, they far outperform the average investor who mis-times the market. The average investor enters and leaves the market at the worst times, underperforming by a few percentage points each year on average. This buying-high and selling-low timing behavior damages long-term returns. Paying active management fees (e.g. 1% per year) makes returns worse. Returns compound on themselves, a great benefit to the investor. Fees also compound, to the benefit of someone other than the investor. Paying 1% annually to a financial advisor may further dent long-term returns. But Robert Shiller notes that advisors can dissuade investors from market timing. For clients who will always follow advice, the 1% advisory fee is worth it." You could look up the P/E of an equivalent ETF, or break the ETF into components and look those up. Each index has its own methodology, usually weighted by market cap.  See here: http://www.amex.com/etf/prodInf/EtAllhold.jsp?Product_Symbol=DIA Some other suggestions: Index-tracking mutual funds. These have the same exposure as ETFs, but may have different costs; for example, my investment manager (in the UK) charges a transaction fee on ETFs, but not funds, but caps platform fees on ETFs and not funds! Target date funds. If you are saving for a particular date (often retirement, but could also be buying a house, kids going to college, mid-life crisis motorbike purchase, a luxury cruise to see an eclipse, etc), these will automatically rebalance the investment from risk-tolerant (ie equities) to risk-averse (ie fixed income) as the date approaches. You can get reasonably low fees from Vanguard, and i imagine others. Income funds/ETFs, focusing on stocks which are expected to pay a good dividend. The idea is that a consistent dividend helps smooth out volatility in prices, giving you a more consistent return. Historically, that worked pretty well, but given fees and the current low yields, it might not be smart right now. That said Vanguard Equity Income costs 0.17%, and i think yields 2.73%, which isn't bad. "I went to Morningstar's ""Performance"" page for FUSEX (Fideltiy's S&P 500 index fund) and used the ""compare"" tool to compare it with FOSFX and FWWFX, as well as FEMKX (Fidelity Emerging Markets fund).  According to the data there, FOSFX outperformed FUSEX in 2012, FEMKX outperformed FUSED in 2010, and FWWFX outperformed FUSEX in both 2010 and 2012.  When looking at 10- and 15-year trailing returns, both FEMKX and FWWFX outperformed FUSEX. What does this mean?  It means it matters what time period you're looking at.  US stocks have been on an almost unbroken increase since early 2009.  It's not surprising that if you look at recent returns, international markets will not stack up well.  If you go back further, though, you can find periods where international funds outperformed the US; and even within recent years, there have been individual years where international funds won. As for correlation, I guess it depends what you mean by ""low"".  According to this calculator, for instance, FOSFX and FUSEX had a correlation of about 0.84 over the last 15 years.  That may seem high, but it's still lower than, say, the 0.91 correlation between FUSEX and FSLCX (Fideltiy Small Cap).  It's difficult to find truly low correlations among equity funds, since the interconnectedness of the global economy means that bull and bear markets tend to spread from one country to another.  To get lower correlations you need to look at different asset classes (e.g., bonds). So the answer is basically that some of the funds you were already looking at may be the ones you were looking for.  The trick is that no category will outperform any other over all periods.  That's exactly what volatility means --- it means the same category that overperforms in some periods will underperform in others.  If international funds always outperformed, no one would ever buy US funds.  Ultimately, if you're trying to decide on investments for yourself, you need to take all this information into account and combine it with your own personal preferences, risk tolerance, etc. Anecdotally, I recently did some simulation-based analyses of Vanguard funds using data from the past 15 years.  Over this period, Vanguard's emerging markets fund (VEIEX) comes out far ahead of US funds, and is also the least-correlated with the S&P 500.  But, again, this analysis is based only on a particular slice of time." You can follow the intra-day NAV of an ETF, for instance SPY, by viewing its .IV (intra-day value) ticker which tracks it's value.   http://finance.yahoo.com/q?s=spy http://finance.yahoo.com/q?s=^SPY-IV Otherwise, each ETF provider will update their NAV after business each day on their own website. https://www.spdrs.com/product/fund.seam?ticker=spy You can check the website for the company that manages the fund. For example, take the iShares Nasdaq Biotechnology ETF (IBB). iShares publishes the complete list of the fund's holdings on their website. This information isn't always easy to find or available, but it's a place to start. For some index funds, you should just be able to look up the index the fund is trying to match. This won't be perfect (take Vanguard's S&P 500 ETF (VOO); the fund holds 503 stocks, while the S&P 500 index is comprised of exactly 500), but once again, it's a place to start. A few more points to keep in mind. Remember that many ETF's, including equity ETF's, will hold a small portion of their assets in cash or cash-equivalent instruments to assist with rebalancing. For index funds, this may not be reflected in the index itself, and it may not show up in the list of holdings. VOO is an example of this. However, that information is usually available in the fund's prospectus or the fund's site. Also, I doubt that many stock ETF's, at least index funds, change their asset allocations all that frequently. The amounts may change slightly, but depending on the size of their holdings in a given stock, it's unlikely that the fund's manager would drop it entirely. that's just it, though - they are splitting up the 1%! and in most cases, especially vanguard, they are splitting up far less.  ETFs don't have 12b-1 fees. explaining why you're experiencing different returns for ETFs will almost certainly involve something other than their expense. again, this is especially true for vanguard. they have the cheapest ETFs around (though i think schwab beats them on a few now).  i can only guess at the full compensation structure. betterment likely earns money on cash reserves and  securities hypothecation (i guess?). they also charge a small fee from what i understand. finance is very slim these days.  i guess i'm wondering what your ultimate question is. if it's the inter corporate compensation structure, above is my best guess. if it's about performance, then we need to compare the ETFs you are looking at. if it's about the fees on funds, i think we covered that!  as an advisor, it's my experience that very specific inquiries about fees have a deeper concern. people hear a lot about being overcharged so cost is a very standard place for clients to initially look when trying to compare performance of portfolios or securities. "There are some index funds out there like this - generally they are called ""equal weight"" funds.  For example, the Rydex S&P Equal-Weight ETF.  Rydex also has several other equal weight sector funds" Over the past five years, QFVOX has returned 13.67%, compared to the index fund SPY that has returned 50.39%. SEVAX has lost 23.96%. AKREX has returned 81.82%. In two of your three examples, you would have done much better in an index fund with a very low expense ratio as suggested. While one can never, as you see, make a generalization, in almost every case, most investors will do better, and often much better, with an index fund with a low expense ratio. My source was Google Finance. If you want to retire in 7 years at age 35 and only currently have 150k, and you need to ask this question of how to invest your money (risk free), then you will not be retiring at age 35 nor buying your house.  It is possible to do (but not risk free - in fact you will need to take quite a bit of risk) but you would need to have a detailed plan about how you would go about to achieve this goal, what assets you would be investing in, and what risk management you would have in place. If you have to ask this question all you have is a goal but no plan. You probably will need to do plenty of research in the types of investment you prefer and develop a plan to take you to your destination. This could take you a year or 10 years, depending on how motivated you are in acheiving your goals.