When it comes to index investing, I always held the belief that ETF is a low-cost alternative to ordinary index-tracking mutual funds. However, according to the article "It's the Execution, Stupid" from Efficient Frontier, ETF (Spider and iShares) lost to Vanguard funds in seven out of seven comparisons, even before considering the trading commissions associated with ETFs.
In the case of S&P 500, Vanguard beat Spider (ETF) by 0.16% over a period of 10 years. In the extreme case of S&P 600 Value, Vanguard beat comparative iShare ETF by 80 basis points over a period of 3 years.
It should be noted, however, that Vanguard is the low-cost leader of index funds. Some notorious funds charge a front load as high as 5.75% just to do the same index-tracking job (NASPX is one of such funds).