ETF's 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.
Bi-yearly, mutual funds are required to inform investors of their holdings. For the most part, mutual fund purchasers are not aware of what they own.
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.
What makes ETFs unique is that they stay very close to their net asset value. The price of the ETF stock cannot drift too far above or below its actual value because professional traders will push it back in line quickly if they see disparity.
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.
Mutual fund manager's results vary and it's imperative that any investor does due diligence research. Often, an ETF in the same area of focus outperforms the fund. - 23199
Bi-yearly, mutual funds are required to inform investors of their holdings. For the most part, mutual fund purchasers are not aware of what they own.
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.
What makes ETFs unique is that they stay very close to their net asset value. The price of the ETF stock cannot drift too far above or below its actual value because professional traders will push it back in line quickly if they see disparity.
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.
Mutual fund manager's results vary and it's imperative that any investor does due diligence research. Often, an ETF in the same area of focus outperforms the fund. - 23199
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posted by X - Men @ 3:53 AM
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