Mutual Funds vs ETF's
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 history of Exchange Traded Funds goes back to the first such instrument created, the S&P Depository Receipt known as SPDR. The shorthand symbol is SPY and is composed of the 500 companies that make up the S&P 500.
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.
The expenses to own an ETF is negligible. For instance, fees for SPY (S&P 500 index ETF) are pegged at 0.09 percent.
Unlike a mutual fund, with an ETF you know exactly what that index is composed of. There is no mystery.
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? - 23223
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 history of Exchange Traded Funds goes back to the first such instrument created, the S&P Depository Receipt known as SPDR. The shorthand symbol is SPY and is composed of the 500 companies that make up the S&P 500.
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.
The expenses to own an ETF is negligible. For instance, fees for SPY (S&P 500 index ETF) are pegged at 0.09 percent.
Unlike a mutual fund, with an ETF you know exactly what that index is composed of. There is no mystery.
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? - 23223
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posted by X - Men @ 9:00 AM
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