Exchange Traded Funds Vs Mutual Funds

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%.

When you purchase a mutual fund you are left in the dark as to what you are getting. Fund managers only are required to disclose their holdings twice a year and that comes with a 30-60 day time delay.

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.

ETFs are liquid in that you can buy and sell them at any time. You can place stop-loss and limit order as protection. You can see the latest quote in real-time.

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 is that 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.

Many feel EFT's beat mutual funds by a large margin. Mutual funds have shortcomings that glare into the face of any serious investor. Unless one has complete faith in the fund manager for this type of "hands-off" negotiation one may get in trouble.

Not only ETF research and screeners, but also expert insight on the market and economy that will help you in your everyday financial decisions at http://www.wallstreetjournalnews.org/eft-trader.htm

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