Fundamentals of ETFs and Mutual Funds
When you hear the word “funds and ETFs”, what do you think of? If you’re like most people, you think of the popular funds of mutual funds. Although this is one type of mutual fund, it isn’t the only type out there. There’s also stock funds, bond funds and real estate funds and ETFs.
An exchange traded fund is basically an equity index managed by a brokerage firm. Typical investments in ETFs or mutual funds include stocks, bonds, money market accounts, and certificate of deposits (CDs). There are several types of expenses associated with these types of portfolios, including management fees, transaction fees, as well as applicable taxes. Funds and ETFs vary greatly in the way that their managers handle the money that their investors put into the investments. Some funds are managed by professional traders while others are managed by the fund manager(s) of the individual investor’s portfolio.
In order to truly determine if an ETF or mutual fund is the right option for your portfolio, you need to have a good understanding of all of the investment types available. Index funds are considered to be a form of middle-market investments. Examples of index funds include the broad-type funds that track the price of a variety of underlying assets. Some of these types of funds are reasonably stable and low risk, whereas others like the balanced-type funds offer higher profits but come with relatively high risks. The fund should carefully consider the relative merits of the various types of investment in order to pick the most appropriate funds and ETFs for your portfolio.