Trend: BlackRock bought Barclays Global Investors (developer of the popular iShares ETFs) for $13.5 billion – a major fund player moving into the ETF market.
Below are five reasons why Price Headley prefers ETFs over mutual funds. Mutual fund investors should read carefully.
1) Liquidity -- In today's fast-moving markets, you simply can't afford to have to wait until the end of the day to get in or out when you need to. ETFs are exchange-traded and thus have continuous pricing throughout the trading day, just as any other stock or option traded on an exchange would. So, you have maximum flexibility to enter or exit whenever you see an opportunity or if you need to pull the plug on an investment more quickly.
2) Lower Fees -- While some think since there's no upfront commission on the typical "no load" mutual fund, there are plenty of hidden fees in the form of 12b-1 marketing fees and management fees from the fund company that make me much more comfortable paying the relatively small commission on an ETF without worrying about what's getting taken out of the back end of the typical mutual fund's fee structure.
While index funds may have relatively lower fee structures, I'm more interested in the sector-specific ETFs, and the sector mutual funds often have high turnover and higher fee structures, while also being run by younger staffers as a "proving ground" to see if they can move up to the fund company's bigger fund offerings.
I'd prefer not to be a guinea pig for others to cut their teeth on my portfolio assets -- how about you?