Mutual Funds vs ETF's
Why buy mutual funds when you can be owning an Exchange Traded Fund (ETF)? Mutual funds have limited liquidity in that you can only buy and sell mutual funds at the end of the day. Plus exorbitant fees charged investors average 1.5%.
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.
ETF's stay very close to their inherent net asset value. If values drift too far, professional arbitrage traders will soon bring values into line. It is entirely self-policed by these mechanics.
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 management fees for EFTs dwarf those of mutual funds. SPY, for instance, 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? - 23221
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.
ETF's stay very close to their inherent net asset value. If values drift too far, professional arbitrage traders will soon bring values into line. It is entirely self-policed by these mechanics.
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 management fees for EFTs dwarf those of mutual funds. SPY, for instance, 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? - 23221
About the Author:
For insights and articles on ETFs plus major financial news coverage, read the Wall Street Journal. Most every serious investor reads it for breaking investment news and new ideas that will affect the financial future. Get free delivery of the Wall Street Journal for 80% off news stand price at Wall Street Journal Subscription
posted by X - Men @ 3:06 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home