ETF's

[vindikation]

What advantages do ETF's have over Index Funds, Mutual Funds, Stocks, Bonds, etc?

ETF's seem to be popular, but I'm having a hard time finding simple information (i.e. noob stuff I can understand) on why they might be a good thing to invest in.

Thanks

[chardog]

Some advantages..
http://www.investopedia.com/terms/e/etf.asp

Disadvantages.. you must pay a brokerage commission for each ETF transaction you make, just like any other purchase/sale of stock. With mutual funds you can normally add money to your fund without charge. Similarly, you can usually specify that dividends generated by a mutual fund be automatically re-invested w/o charge. With an ETF you will normally recieve the dividend in cash and therefore must pay for an additional transaction to re-invest.

[TheBigFlop]

You can buy and sell ETFs like stocks. Instead of waiting until the market closes to purchase mutual funds, stocks trade during the day. If you want to invest on a consistent basis (dollar cost average), then mutual funds are more economical due to brokerage commissions. But if you have a large sum of money and want to invest in the long run, ETFs are more economical because the fees are usually lower than mutual funds. ETFs are also more tax efficient b/c they don't generate a taxable distribution for shareholders.

[Sniper]

http://www.etfconnect.com/

[John Ho]

Other advantages to ETFs are the ability to short them for whatever reason and usually lower management fees than an index fund.

I personally use them to short a sector when I own a stock I believe will outperform it's sector but when I am unsure as to whether the sector as a whole is going to go up. For example, if you owned Apple and believe it will outperform tech as a whole you could short the QQQ, own Apple, and even if tech takes a big drop you will still profit even if Apple is doing well but gets hit with sympathy selling.

ETFs are the coolest thing for sound portfolio management in some time. You can also, of course, short or long ETFs to overweight or underweight sectors without disturbing your core index holdings that might generate taxes.

[vindikation]

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But if you have a large sum of money and want to invest in the long run, ETFs are more economical because the fees are usually lower than mutual funds.

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How is the brokerage fee on Mutual Fund different from a fee that an ETF would require? Say you had the same $1000 invested in a Mutual Fund and $1000 in an ETF that behaved the exact same way over a period of 1 year.

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ETFs are the coolest thing for sound portfolio management in some time. You can also, of course, short or long ETFs to overweight or underweight sectors without disturbing your core index holdings that might generate taxes.

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Do you mean invest for a short or long period of time (weeks/months vs. years)? Are there less fees or penalties involved with short term investing an ETF vs. a Mutual Fund?

[Sniper]

[ QUOTE ]
How is the brokerage fee on Mutual Fund different from a fee that an ETF would require? Say you had the same $1000 invested in a Mutual Fund and $1000 in an ETF that behaved the exact same way over a period of 1 year.


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The management fees on ETFs based on indexs and Index funds are the lowest around. Mutual funds that are actively managed have higher fees.

[ QUOTE ]
Do you mean invest for a short or long period of time (weeks/months vs. years)? Are there less fees or penalties involved with short term investing an ETF vs. a Mutual Fund?

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ETFs are intended as a short term trading vehicle, you can trade them at any time of the day. Index/Mutual funds can only be traded based on End of Day pricing. No Transaction fee Funds are best if you intend to make regular monthly additions.

Bottom line, I recommend ETFs if you intend to Trade (short term), and Funds if you intend to Invest (long term)!

[vindikation]

thanks again