Jay's Article At Christianpf.com: A Little About ETFs: 4 Reasons You May Want One
Why are investors turning to exchange-traded funds?
Exchange-traded funds (ETFs) have become fundamental instruments in the pursuit of tax-efficient investing. ETFs have low operating costs, so they represent intriguing alternatives to garden-variety mutual funds that can gradually “nickel and dime” an investor.
Four Reasons ETFs may make some sense for you:
1. The fees are minimal. With their very low charges and management fees, ETFs give you a cheap and convenient way to build a portfolio of index funds. The annual expenses of an ETF (which come out of dividends) range from 0.1-0.65%. If you search, you may find an index mutual fund that charges 0.1% – but some charge more than 3%.Besides being more tax-efficient than index mutual funds, ETFs are easier to manage when it comes to tax loss selling (the swap of short-term capital gains or income tax liabilities for lower long-term capital gains liabilities). And of course, they give you tax deferral to aid in compounding.
2. They trade like stocks. Unlike a conventional mutual fund, ETFs trade throughout the day. They can be bought or sold at any time of the market day. Compare that to mutual funds – you can only redeem them at the closing price of a trading day.
