| Exchange-traded funds (or EFT for short) have | | | | can reduce the amount of money spent on |
| recently become a more and more interesting | | | | market analyses. |
| alternative to classic mutual funds. As of today, | | | | 2. Lower taxes |
| there are over 175 EFTs accumulating over 200 | | | | Unlike mutual funds, exchange-traded funds |
| billion dollars - and these numbers are growing. | | | | distribute nothing but a dividend from time to |
| While it is improbable for EFT to completely | | | | time, so there are few reasons to get taxed. |
| supersede classic mutual funds (at least in the | | | | 3. They're transparent |
| near future), they are an interesting alternative | | | | You can check real-time what your EFT is actually |
| and probably a must-have in every beginners | | | | doing with your money, while mutual funds report |
| portfolio. | | | | their holdings only twice a year. |
| What is EFT? | | | | 4. Extra trading opportunities |
| Basically, an exchange-traded fund is a fund made | | | | EFTs are sold just like normal stocks, thus |
| of a portfolio of stocks from a single market. The | | | | creating many different trading options. Stop-loss |
| portfolio is composed based on an index, industry | | | | and limit orders are but one of many opportunities |
| sector or (more rarely) a country the companies | | | | available only to stock trading. |
| are tied to. There are many stocks in each EFT | | | | Switching to EFT |
| portfolio, so the risk of the losses is roughly the | | | | Switching to exchange-traded funds is relatively |
| same as in case of mutual funds. However, the | | | | easy on tax-free accounts, such as IRA (Individual |
| expenses are tied thus keeping EFT funds from | | | | Retirement Account), where you simply cease to |
| going much lower, and the fees charged by EFTs | | | | invest in mutual funds or stocks and start buying |
| are minimal, giving investors additional income. | | | | EFTs. However, when we're speaking about |
| What's more, EFTs trade like stock, making life | | | | taxable accounts, you will have to make a switch |
| easier both for investors and fund managers. | | | | only a little at a time to ease the taxation burden |
| Benefits | | | | on your revenue. |
| 1. Low fees | | | | Remember that while Exchange-traded funds are |
| The most obvious strong point of EFTs is their | | | | an excellent investing opportunity, it is not without |
| low fees. While lowering them to such levels as | | | | risk, so consult with your Financial Professional |
| 0.2% a year may look like magic, it is completely | | | | before investing, especially if you have a taxed |
| normal - due to the fact that all the stocks are | | | | account. |
| tied to some single slice of the market, the funds | | | | |