Exchange Traded Funds vs Mutual Funds
Owning mutual funds can be expensive when you consider the 1.5% average charge for advisory fees that go to the broker or financial planner that helps you select the funds. Exchange traded funds (ETF) can be your answer to greater flexibility at a lower cost.
Mutual funds are only required to declare their investment holding twice a year. Investors in funds are in the blind and not sure what they own until it is disclosed.
The first ETF's was the S&P Depository Receipt known as SPDR (exchange symbol SPY). It was basically a stock that owned all 500 companies that make up the S&P 500 Index. So with one trade you could own the whole S&P 500 index.
Professional traders keep the market price of ETFs in line with the value of the underlying stocks by arbitrage of any price disparities. Unlike mutual funds where their price may get distorted in regard to the underlying value, ETFs give a fair deal.
Just like a stock, one can place loss protection in the form of stop-loss and limit order. You are able to see quotes on a real-time basis.
Also, ETF's are inexpensive to own. The fees are less than 1% a year. For instance the SPY has an annualized net expense of 0.09 percent.
Best of all, ETFs are transparent and you always know what you are getting. You'll know exactly what the market index is composed of. There is now wondering if your ETF owns something that you did not know about.
If there is a choice between mutual funds or ETFs, one should be aware of fund management past history and direction. How do they do in a bear market? How do they perform in a bull market? Do the beat the ETF for the same investment area? - 23210
Mutual funds are only required to declare their investment holding twice a year. Investors in funds are in the blind and not sure what they own until it is disclosed.
The first ETF's was the S&P Depository Receipt known as SPDR (exchange symbol SPY). It was basically a stock that owned all 500 companies that make up the S&P 500 Index. So with one trade you could own the whole S&P 500 index.
Professional traders keep the market price of ETFs in line with the value of the underlying stocks by arbitrage of any price disparities. Unlike mutual funds where their price may get distorted in regard to the underlying value, ETFs give a fair deal.
Just like a stock, one can place loss protection in the form of stop-loss and limit order. You are able to see quotes on a real-time basis.
Also, ETF's are inexpensive to own. The fees are less than 1% a year. For instance the SPY has an annualized net expense of 0.09 percent.
Best of all, ETFs are transparent and you always know what you are getting. You'll know exactly what the market index is composed of. There is now wondering if your ETF owns something that you did not know about.
If there is a choice between mutual funds or ETFs, one should be aware of fund management past history and direction. How do they do in a bear market? How do they perform in a bull market? Do the beat the ETF for the same investment area? - 23210
About the Author:
ETF Trader is an coaching service for serious investors who want to take advantage of the investment potential of exchange-traded funds. The heart of ETF Trader is the Lowell Technical Trading System, the fruit of editor Jim Lowell's 20 years of investment research. You'll learn about maximizing your investment while avoiding down turns at EFT Investing
posted by X - Men @ 9:02 AM
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