Are ETF’S The Way To Go? Here Are Some Hot Ones.
I have invested in mutual funds for nearly 40 years. They satisfy my tolerance for risk. Anyone who decides to invest in anything has to determine her/his risk tolerance.
Since mutual funds spread the risk across many stocks, they are usually more stable.
Most funds will specialize their investments in certain types of stocks such as growth, value, small cap, large cap. Some will concentrate on certain sectors of the economy such as energy, consumer goods, utilities, etc. Some sector funds can specialize in overseas stocks or companies in countries such as Brazil, Japan, India.
One disadvantage with mutual funds is that they can only be traded at the end of the business day when net asset values are determined. If you enter a buy order during the day, you can not put a limit on what you are willing to pay per share. If you sell a fund, your order is entered during the day. If the fund was up at the time you submitted the sell order, it might be down when the market closes and your selling price is calculated.
Some mutual funds, called no-load funds, can be purchased or sold without paying a commission. However, some funds are now charging a redemption fee of .75% to 2.0% if the fund is held for less than a certain period which ranges from 7 to 90 days.
Exchange traded funds are relatively new to the investment market. They are funds with a basket of stocks but most times ETF’s will follow an established index which will also lower their management fees.
ETF’s are stocks and as such are traded like stocks, not like mutual funds. The same rules apply to ETF’s as to stocks. The ETF has a price that changes with the market during the day and can be purchased during the day. Limit and short orders can be placed as well as day-only or good-till-canceled orders.
ETF’s can be bought and sold through discount brokers such as Chas Schwab or Scottrade for $12.95 or less per trade. You can buy one day and sell the next without penalty for a short holding period.
Below I have listed some highly performing ETF’s that I obtained from a recent mutual fund newsletter that I follow. You’ll notice that many are invested in foreign stocks. Overseas companies are doing well right now, especially emerging markets.
The weak dollar enhances the effect to U.S. investors. The earnings of foreign companies will translate into more dollars when currencies are converted. This is one of the times when the weak dollar works in the investor’s favor.
Several new books on ETF’s can be found on Amazon.com.
Some high ranked ETFs:
Symbol-Sector
FXI-China
DND-Pacific Dividends
EWZ-Brazil
EEM-Emerging Markets
EWH-Hong Kong
ILF- Latin America
PBW-Clean Energy
FEZ-Europe