Tuesday, December 11, 2007

Are Mutual Funds Obsolete?

A bit of background, first.

Recently, I needed to liquidate some mutual funds that I had not held for the required three-month period. So, I was charged an obscene 2 percent penalty and received phone calls and e-mails promising that my buying privileges would be suspended.

So I looked around for alternatives. I found ETFs. They behave just like mutual funds except that they are not actively managed. Virtually all of them mirror an index published by an outside firm. Also, crucially, ETFs are bought and sold like any stocks. You can buy and sell an ETF at any time the exchange is open and it costs $8 to buy and $8 to sell. No penalties and no threatening phone calls or e-mails. Another difference is with ETFs you can get a price quote at any time the exchange is open.

That's the difference. Rewards and risks are the same. You can make money and you can lose money. You can either make or lose even faster with the leveraged ETFs.

More info at:

http://finance.yahoo.com/etf

http://www.morningstar.com/Cover/ETF.html

and of course, you can pick and choose among Google or Yahoo offerings under "ETF."

Good luck!

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