I recently read an article that questioned the future of mutual funds. It seems that ETFs or electronic traded funds are taking over and there are some good reasons that so many people are making the shift.
First, the expense ratios of ETFs are generally lower versus active mutual funds and in some cases, even lower than index mutual funds. Also, ETFs often have lower trading costs versus actively managed funds, due to their low portfolio turnover. The ETF cost savings can be significant, especially for long-term investors.
Second, transparency – Actively managed mutual funds report their holdings on a quarterly or semiannual basis, whereas exchange-traded funds disclose their portfolio holdings on a daily basis.
And, third ETFs are renowned for having low portfolio turnover, which is good for investors, because it reduces the possibility of tax gain distributions.
The only problem some 401(k)s and other qualified plans may not have made them available as yet. But if you do some investing on your own, you might want to look into ETFs – it could save you a lot of money!
And that’s the minute for today. I love helping people with all aspects of their financial lives. If you have a question, send it to me at firstname.lastname@example.org.
Thanks for listening and as always remember that minding your money really is the path to a richer life!