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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75821  
Subject: Re: Roth IRA Questions Date: 1/6/2005 10:33 AM
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>> I read here that the returns from simular ETF's and Mfunds were about the same, and since most of the fund gains come from increase in price (is this right?) it would seem to me since the ETF's have a much higher price than the Mfunds that I would be able to buy much less of the ETF's and if their increases are at the same rate wouldn't I make a lot more money in the Mfunds since I would have more shares to increase ? <<

Not so. When we say both the ETF and the index funds essentially have similar returns, we mean *percentage* returns, not dollars-per-share.

If an index rises 10% and you have $1,000 invested in it, you'll have about $1,100 whether you have 10 shares at $100 (rising to $110) or 100 shares at $10 (rising to $11).

The $100 shares rise in value by $10; the $10 shares rise by $1. In both cases the share price rises 10%. With the $10 shares you'd have 10 times as many shares rising in value, but each share would rise 1/10 as much as the $100 shares...so it's a wash. Both rise 10%.

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