Since introduced in 1993, exchange traded funds, or ETFs, have changed the way many individuals invest in equities. In prior eras investors would gravitate towards well-known mutual fund managers like Peter Lynch at Fidelity, but today many are putting money into ETFs.
In this edition of Investing 101 Breakout explains how ETFs differ from mutual funds and how investors can tell which are right for their portfolios.
ETFs Don't Have Mutual Fund Fees
It's easy to confuse ETFs with the traditional funds. Kelly Campbell, founder and CEO of Campbell Wealth Management, explains that, while both mutual funds and ETFs are pools of invested money, ETFs aren't actively managed.
As a result of this "hands off" approach to investing your money, ETFs don't come with the often onerous fees associated with mutual funds. Back in the days of star money managers, a mutual fund could charge multiple percentage points just for the privilege of taking your money. Those days are gone.
ETFs Still Have Market Risk
Mutual funds may have fallen out of favor after the hot-shot fund managers failed to protect investor money during the volatility of the last ten years, but that doesn't necessarily make ETFs safer.Read More »from Mutual Funds vs. ETFs: Which Is Right for You?