Best of the Week
Most Popular
1.UK General Election Exit Polls Forecast Accuracy - Nadeem_Walayat
2.What's Next for the Gold Price? - Axel_Merk
3.UK House Prices Correctly Forecast / Predicted Conservative Election Win 2015 - Nadeem_Walayat
4.15 Hours to Save England from SNP Scottish Nationalist Dictatorship - Election 2015 - Nadeem_Walayat
5.Exit Poll Forecasts Conservative UK Election 2015 Win - Nadeem_Walayat
6.Gold And Silver China’s Pivotal Role: More Questions Than Answers. Not So For Charts - Michael_Noonan
7.Conservative Win 2015 UK General Election, BBC Forecast of 329 Seats - Nadeem_Walayat
8.Investing and the Lollapalooza Effect - Niels C. Jensen
9.Gold Price Target - Rambus_Chartology
10.Gold Price Nearing An Important Pivot Point - GoldSilverWorlds
Last 5 days
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15
Time To Get Real About China - 22nd May 15
Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - 22nd May 15
One Investment Could Save Two Generations' Retirements - 22nd May 15
Investing is About Identifying Gifted and Talented Camps - 22nd May 15
One of Europe's Latest Debt Nightmares - 22nd May 15
UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - 22nd May 15
America Superpower 2016 - 21st May 15
Stock Market Secular Versus Cyclical Investing - 21st May 15
Banking Stocks Break Out with Higher Bond Yields - 21st May 15
The Tech Portfolio Built to Beat the Market - 21st May 15
Gold “Less Sexy” Than Bitcoin … For Now - GoldCore on CNBC - 21st May 15
The Russia-West Rivalry in the Balkans - 21st May 15
The US Dollar and the Precious Metals Complex - 21st May 15
Gold GLD ETF Drawdown Continues Unabated - 21st May 15
Who’s Killing the Stock Market? - 21st May 15
Your Best Way to Profit from the Narrowest Market in 20 Years - 21st May 15
Government Regulation and Economic Stagnation - 20th May 15
It’s Time to Hold More Cash and Buy Gold - 20th May 15
Choppy Asian Stock Markets - 20th May 15
Countdown to Global Financial Collapse - 20th May 15
Will Interest Rates Ever Rise? - 20th May 15
How to Cash in on Amazon Stock’s Amazing Cloud Success - 20th May 15
Three Hidden Forces Pushing Crude Oil Price Back Up - 20th May 15
U.S. Housing Market Strong Numbers in Perspective - 20th May 15
Greece Debt Crisis - Obama Has A Big Fat Greek Finger - 20th May 15
Now Is the Time to Own the Oil & Gas Leaders - 20th May 15
UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - 20th May 15
Trading Gold and Silver along with the Pros - 19th May 15
Gold Ticks Higher as London Housing Market Crash Looms? - 19th May 15
Global Stock Market, Commodities Group Analysis - 19th May 15
How Stock Investors Could Profit from the Dark Net Pattern That Few Others See - 19th May 15
The Patriot Act is now USA Freedom Act - 19th May 15
Investing in Europe? 5 Critical Insights to Boost Your Portfolio Now - 19th May 15
Gold Price Trend Forecast - 19th May 15
Stock Market Continues Defying Gravity, Dow New All Time High - 19th May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

How Exchange-Traded Funds Can Save You Money

Companies / Exchange Traded Funds Apr 27, 2012 - 01:40 PM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDon Miller writes: High commissions and management fees, along with taxes, can really cut into your returns.

That's where exchange-traded funds, or ETFs, come in. In today's investment world, ETFs are cheaper and more tax-friendly than mutual funds.


The average expense ratio for U.S.-listed ETFs is 0.4%, compared with 1.42% for diversified U.S. stock funds.They also give you exposure to an entire industry or market with the click of a mouse.

It's one of the reasons why exchange-traded funds are quickly becoming the investment of choice for investors seeking broad market exposure.

In fact, the number of ETFs has surged over 10-fold in the last decade.

The total number of ETFs in the market grew to 1,114 by October 2011, with assets over $1 trillion, according to the Investment Company Institute.

And the ETF market will expand to roughly $3.1 trillion by 2016, according to projections from the Financial Research Corp. in Boston.

So if you're looking to diversify your portfolio and save money doing it, ETFs may be the way to go.

Here's a primer on how ETFs can work for you.

ETFs Trade Like Stocks
The beauty of ETFs is that they are easy to buy and sell. All you need is a brokerage account. And for the most part, they are liquid and trade openly during market hours.

You can buy or sell ETFs throughout the day and set price and time limits. So if the market is plunging at noon and you decide to sell, you can sell at the market price, in an instant.

This is a huge advantage over mutual funds, where you can only buy or sell at the end of the day. If you sell a mutual fund and the market continues to fall, you will receive whatever price the fund falls to at the market close.

ETFs are baskets of securities that track a wide variety of investment classes, such as U.S. and international stocks, precious metals, commodities, bonds and currencies.

They usually use a so-called passive management approach to track a particular stock market index, with the goal of matching that index's performance.

An ETF consists of the same equities as the index it tracks, although it may not contain all the equities in that particular index. But it will contain enough of them so that it will reflect the direction and price of the index.

Keep in mind that while an ETF is similar to its underlying index, it's designed to mimic the index, not outperform it.

However, other ETFs are leveraged to double or triple the return of an index. Still others allow investors to profit from market downturns by shorting the indexes.

Why Buy an ETF?
One major benefit of an ETF is that they are more tax efficient than a mutual fund.

Every time the assets in a mutual fund are sold at a profit, Uncle Sam takes a cut in the form of a capital gains tax. With ETFs those gains are not realized until the entire investment is sold. So you'll be paying capital gains taxes less frequently.

ETFs can also save you money on trading commissions.

If you're trying to buy an index of stocks, you pay a commission on each transaction. ETFs pre-package the equities for you in one tidy bundle-all in one trade, at one price, for one commission.

And remember, ETFs also charge less in management fees than mutual funds.

You can use an ETF either to get exposure to a market or industry, or hedge your risk against too much exposure.

For instance, you might feel you have too much exposure to Europe and Japan and not enough to China and Brazil. You could hedge against that risk with the Vanguard MSCI Emerging Markets ETF (NYSE: VWO).

Your investment horizon is also an important consideration. You can buy leveraged ETFs to protect against short-term downturns, or you can hold standard ETFs for long-term gains.

Top-Ranked ETFs
After you've decided which market you want to buy (or sell) you should lean towards the lowest cost ETFs in that category, according to Forbes.

"Let's assume you have picked the category you want exposure to...Then three things matter: costs, costs and costs," columnist William Baldwin recently wrote referring to ETFs.

Forbes ranked the four best buys in each of 11 categories, assuming a three-year holding period.

A few of the top-ranked ETFs with broad exposure to markets include: Vanguard Total Stock Market ETF (NYSEArca: VTI), the iShares Gold Trust (NYSEArca: IAU), the PIMCO 1-3 Year US Treasury Index Fund (NYSEArca: TUZ), and the Vanguard FTSE All-World ex-US ETF (NYSE: VEU).

These are just a few of the hundreds of ETFs that can reduce your trading costs and improve the performance of your investment portfolio.

Source :http://moneymorning.com/2012/04/27/investing-in-etfs-how-exchange-traded-funds-can-save-you-money/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History