Mutual Fund Investor Look at ETFs
Any financial advisor that puts your capital into a mutual fund has turned the tables on you. Your capital now works for them! At no risk! Any mutual fund investor look at EFTs for big savings.
If your financial advisor puts you into mutual funds, your account needs review . Your capital delivers a no risk and constant return…to them! What about you? You, however, get the leftovers.
Market movement up or down does not matter to their return. They get their return, every year. From you. No matter what the market does, each year they take a nice slice of your account.
You put up the capital, take the risk, but get only the leftovers. Should it be the other way around? Should they be working for you?
Moving Mutual Funds and ETFs
Anyone that uses mutual funds for their retirement savings needs to check their approach. If you are dealing with a company that offers only one type of investment, such as mutual funds, you need to go to another company. It could certainly be a change that pays you very well.
You can possibly do far better for yourself, at far lower costs. And yes you can get at least comparable or perhaps better performance. The big difference, very significant cost savings, compound in your favor.
Go to a company that offers alternatives including Exchange Traded Funds or ETFs. But be careful. If you are in effect being held captive by a mutual fund company, you need to carefully look at your alternatives.
Mutual fund companies can make moving very expensive. Get help from a quality professional advisor. Quality professional financial planners are worth their weight in gold.
With a little effort and determination you can dramatically improve your returns. Over time making that one change offers possibilities that significantly grow your net worth. Improving net returns can possibly change your retirement comfort for the better. Make the effort to find out.
Mutual Funds and ETFs
You have multiple alternatives to mutual funds. ETFs are the easiest alternative to consider. If the company you deal with offers only mutual funds, they offer only high cost products.
While ETFs are similar to mutual funds there are important differences. Almost all of those differences favor you with lower costs as compared to mutual funds.
The biggest and most important difference are the direct costs you pay. Mutual funds take more of your money and earnings. No matter how the sales rep tries to spin the story, mutual funds, at the end of the day, give you less.
Both mutual funds and ETFs hold stock positions in multiple companies. Most, but not all funds hold from 70 to 3,000 different securities.
Other discussions will discuss investing in so many holdings. For now, we focus this discussion on a straightforward comparison between mutual funds and ETFs with both tracking the same index.
In another discussion we will explore indexes in greater detail. For this discussion we accept indexes as indicators of stock market performance.
Like stocks, ETFs list on stock exchanges. That means they trade throughout the day like any other stock listed on the market. The price moves up and down based on supply and demand.
In contrast mutual funds trade only at the end of the day. Their price gets set at the net asset value price (NAV). NAV is the simple mathematical total of all the price of all holdings in the fund at the closing price of the shares, held in the fund, that day.
Mutual funds typically have management fees, sales loads and investment minimums. ETF costs are a small fraction of those totals. As products of the digital age ETFs structure works with markets as they exist today. The operating costs of ETFs are minimal.
The first ETF was a Canadian creation in 1990 designed as a financial product taking full advantage of the low costs of digital markets and current business and market technology. From the first index tracker the ETF market grew to span every market. Virtually all markets and components are now covered with thousands of ETF product offerings.
In contrast, in 1774 the first mutual fund emerged from the Netherlands. As products of their age that grew with trading developments, they largely stay mired in old thinking and saddled by old administration. Their obsolete sales, distribution and administrative structure puts them at a great cost disadvantage. Mutual fund holders cover those costs.
Mutual funds simply have an uncompetitive business model and structure. However, the industry vigorously resists transparently exposing this to consumers. So the costly financial differences remain obscure but continue coming directly from the pockets of investors.
It is well worth your while figuring out how to extract yourself from that very expensive and obsolete matrix. Investors considering ETFs as an alternative to mutual funds realise high costs take a large bite of their wealth. Do your homework on this to directly change your future wealth prospects for the better.
Our discussion, mutual fund investor look at ETFs will continue.
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