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Exchange Traded Funds Vs. Mutual Funds

I did not write this article, but I believe it is a worthwhile read.  Note that it is provided and written by an organization selling Exchange Traded Funds (ETFs).  Some of the key features of many ETFs are

  1. They are tied to an index and your performance should closely match that index.  Therefore, while you will not likely exceed the index other than for subtracting error, you should also not be much lower than the index, except for fees.
  2. The fees are low – usually a small fraction of 1% versus much higher for mutual funds.
  3. They are bought and sold like individual stocks, with fluctuating prices during the day, and require a licensed broker or a self-administered trading account to buy and sell.
  4. With a full service brokerage account with individual stocks, and with mutual fund holdings, you are relying heavily on your broker and/or the mutual fund manager to actively buy and sell the right investments to beat the market average.  With ETF’s, you are tracking an average of an index –  a passive approach.

Click here for the article –> Differentiating ETFs from Mutual Funds BlackRock Asset Management

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum