(I read this previous question but would like to differentiate my question by having it focus exclusively on long term, buy and hold investing).
From my understanding, it is conventional wisdom that if a person wishes to invest in the stock market but does not have the time or aptitude to evaluate individual stocks and time the market, he should invest only in no-load, low-fee mutual index funds, using a dollar-cost averaging strategy in a buy-and-hold fashion.
The reason for no-load, low-fee, passively managed mutual index funds is because there is empirical evidence to suggest that the expenses from loaded, high fee, actively managed index funds reduce earnings to even below that of low-fee fund.
Ok great; I subscribe to this view entirely. However I was informed that I have to make another decision — whether to invest in ETFs or index funds.
I've learned that ETFs track an index just like a mutual index fund does, except that in general they have lower expense ratios than mutual index funds, and better tax advantages. To those who say that ETFs have commission fees while mutual index funds do not, this is simply not true: If I invest in my broker's ETFs they are commission free (which I would of course do if I were to go with ETFs).
Wait a minute — the whole reason I am supposed to invest in no-load, low-fee mutual index funds is because I diversify my investment across the whole market, obtaining the average growth or loss of the market instead of trying to beat it, while minimizing my expense ratio. But now I hear that its even cheaper for me to use an ETF which is also diversified and attempts to obtain the market average.
Why would a long time investor with the investment philosophy outlined above ever chose a mutual fund over an ETF? What am I missing here?