• http://youhavemorethanyouthink.org/ Shawanda

    For the most part, I like ETFs. Especially when I can buy and sell them without paying trading fees. But I’ve never seen a lot of value in the ability to sell ETF shares during the day as opposed to at the end of the day (as is the case with mutual funds). It’s probably because I don’t change my investment strategy based on daily movements in the stock market, but I don’t understand what’s so terrible about waiting a few hours to sell my mutual fund shares.

    • http://www.facebook.com/people/Jason-Van-Steenwyk/1067420567 Jason Van Steenwyk

      Hello, and thanks so much for commenting, Shawanda! Sure, if you’re not a trader, then there’s little advantage – in normal times – to being able to buy and sell shares “intra-day.” If there are big changes in the market, though, the ETF trader has a huge advantage over the mutual fund owner. If there were a sudden nuke strike on the Korean peninsula at 10 am ET, and Asian markets began to plummet because investors were adding a huge risk premium, for example, the fast hands could dump Korean or Asian emerging market ETF shares by noon. In a mutual fund, you’re stuck until the end of the day. And you won’t know if your fund manager is taking any action to preserve shareholder value in the meantime. This was a big factor when markets plummeted amidst the TARP debate in 2008, and during the crash of October 1987. Similarly, you can buy into the market on good news, too, way ahead of the traditional mutual fund investor. Say the Fed issues a statement saying it expects growth rates substantially ahead of expectations, sending the Dow up 500 points in one day. A big part of that 500 points will come within an hour or two of the announcement. ETF traders can exploit that movement; open-end fund holders will get what’s left over. Not a big deal in normal times, but it can be a big deal in a crisis, even for someone who is normally a buy-and-hold kind of investor. This is also important if you’re a profession money manager, holding assets on your clients behalf for a fee. You don’t want to have to apologize to your client for a needless loss on bad market news because you had to wait until the end of the day for your sell price to be calculated.

  • http://www.manhattancalumet.com/ Dennis The Menace

    I like exchange traded funds so very much because they can reduce your risk because when buying a exchange traded fund your buying a whole basket of stocks instead of just a single security. In theory an exchange traded fund cannot go to zero unlike individual stocks. The second advantage of exchange traded funds is that their are now thousands of funds to choose from. I particularly like narrowly focused funds that specialize in coal steel solar stocks among others and single country funds which buy securities in a single country like china india among many others. Because of the wide aray of funds available Today you can build a diversified portfolio of funds’ Concentrating on the exchange traded funds that are most out of favor and have declined by the largest percentage. For example their is a solar Exchange traded fund that trades around 3.00 dollar a share it was trading at 30.00 dollars a share about five years ago. Their are also some single country exchange traded funds that are down by 80% from their highs. The only word of caution for anyone considering investing in exchange traded funds is this always avoid exchange traded funds that use leverage to magnify their returns. These exchange traded funds usually are marketed under double or trible the return of standard and poors five hundred index or some other index. So be very careful of these exchange traded funds because their a very dangerous place to be putting your money their more like options or futures than exchange traded funds in my opinion.

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