What makes exchange traded funds different from mutual funds? Starting your research begins with finding out what ETF stands for. An ETF is the abbreviation for Exchange Traded Funds. One point of similarity between exchange traded funds and mutual funds is that they are both funds traded in the stock market. Your research will lead you to the most important difference between these two funds.
To buy shares of exchange traded funds, an investor can go directly to his investment account and trade, call a stock broker and trade without needing to go the portfolio management team and ask to buy as he would if buying into a mutual fund. Since the investor does not have to go through a committee of portfolio managers as with a mutual fund to invest, the investor does not have to pay the management fees charged by managers of mutual funds.
There are ETFs available in all financial sectors. Learning through your ETF research about combined entities trading on the world’s financial markets as if they were individual corporations is just the start of your exchange traded fund research.
You will learn how to locate exchange traded funds trading as major corporations listed in the S&P 500, The Japanese Nikkei 225 or even in Barclays Corporate and Government Bond Index. You can buy shares of these types of funds as if you were buying shares of common stocks.
Since you buy and sell ETFs like common stocks, you do not pay the usual 1.40% fee mutual funds charge their investors on their stocks returns. Exchange traded funds are joint ventures selling common shares of stock to investors. The investor becomes his own portfolio manager and saves the fees that he would pay to a third party portfolio manager. Searching for ETFs to invest in is a profitable and intelligent use of your time in doing ETF research.
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