| Over the last couple decades, mutual funds have | | | | these mutual funds, buying and selling stocks and |
| been a very popular type of investment vehicle. | | | | or bonds within the portfolio. So, even if you don't |
| However, recent publicity has gone to the index | | | | sell one single share of your mutual fund, you'll still |
| fund and exchange traded funds, or ETF funds. | | | | get hit with taxes since the manager is actively |
| Exchange traded funds and index funds are really | | | | buying and selling within the fund. |
| derived from the original mutual fund. You can | | | | Exchange traded funds are a great way for the |
| think of index funds or ETF funds as a close | | | | knowledgeable investor to invest in certain |
| relative, so to speak, of the traditional mutual | | | | sectors. There are now thousands of investments |
| fund. So, if they are so similar, why the sudden | | | | available, you can invest in just about every single |
| popularity for these new products? | | | | market index or sector there is. If you're |
| ETF funds and Index funds have gathered recent | | | | interested in a particular country, a particular |
| popularity for a number of reasons, but probably | | | | sector, or even a particular index, these |
| the greatest advantage that comes with these | | | | investments are a great way to go. They provide |
| funds is the relatively low expense ratio. An index | | | | you with access to niches that were not readily |
| fund is not typically actively managed by a fund | | | | available in the past. If you want to invest in a |
| manager, like you would see in a traditional mutual | | | | particular sector in India for example, it can be |
| fund. Actively managed funds are inherently more | | | | done with an ETF fund. But, these funds are just |
| expensive than their conventional counterparts. | | | | exclusive to global war emerge in markets, they |
| Index funds are rather simple, in that they just | | | | are also handy when you want a focus on a hot |
| mock a particular index, and this comes at a | | | | sector. ETF funds provided good opportunities for |
| considerable discount to a mutual fund that has a | | | | those seeking returns in the real estate market. |
| team of money managers buying and selling | | | | Not too long ago, when things look like they would |
| securities. While actively managed funds certainly | | | | never go down. Currently, speculators have |
| have their place in the investment world, index | | | | profited from the sudden rise in oil, by utilizing |
| funds mocking indexes such as the S&P 500 | | | | these securities. These investments also provide |
| have often outperformed many money | | | | the opportunity to go short, when necessary. |
| managers. So the thinking goes, that investing in | | | | These short funds, as they are often called allow |
| an index fund will not only costs less, but it will | | | | you to profit in down markets. Though this is |
| often outperform even some of the best fund | | | | considered rather speculative and is best suited |
| managers. | | | | for seasoned experts, as money can be lost |
| Now, the exchange traded fund has had a rather | | | | rather quickly in up markets utilizing these |
| large following in the last couple years. Exchange | | | | techniques. |
| traded funds can be purchased directly on the | | | | It's important to realize that many of these |
| stock exchanges, which puts them at an average | | | | investments, especially sector funds, have a |
| when compared to a conventional mutual fund. | | | | higher degree of risk, as they are not as |
| One reason for this is that exchange traded funds | | | | diversified as the traditional mutual fund type |
| can prove tax-advantaged for a few reasons. | | | | investment. Always do your homework. When |
| Because ETF funds are traded on a stock | | | | investing in any type of security, and don't be |
| exchange, you the buyer, have complete control | | | | reluctant to seek professional guidance. Recent |
| of when this particular security is bought and sold, | | | | studies show that investors working with an |
| and thus you can control its taxes. Where as, | | | | investment adviser are not only have a certain |
| traditional mutual funds offer no such control | | | | level of comfort, but often see better returns |
| because a fund manager is actively managing | | | | than going at it alone. |