At heart, mutual funds and ETFs aren’t such different investments. Both rely on the performance of a collection of stocks to provide big returns for clients. That’s where the similarities end, though; mutual funds and ETFs trade differently and provide varying options for index investing.
Mutual Funds: What You Need to Know Mutual funds are the building blocks of your investment portfolio. There are thousands of funds to choose from, yet most investors really don’t need more than four or five funds. Sifting through all of the choices can be rather daunting. See all mutual fund types.
But it needn’t be. Here is a look at the essentials, along with guidelines on what to look for when purchasing a fund. Once you are done, you should have a better grasp on how to choose the investments you need to build a diversified portfolio, whether it’s for your child’s college fund or retirement savings. Read More
ETF Index Funds: What You Need to Know Exchange-traded funds, also known as E.T.F.’s, have surged in popularity in recent years, and the number and types of products have proliferated. Most E.T.F.’s are simply mutual funds pegged to financial indexes, but with an added benefit: They can be traded throughout the day just like a stock, whereas traditional mutual funds are priced only once a day, at the end of trading. Is it a good time to buy ETFs?
Many people like exchange-traded funds, or E.T.F.’s, for the same reasons they like index funds: they provide easy access to broad spheres of the market, while keeping costs and taxes low. In some cases E.T.F.’s are cheaper than their index-fund counterparts, but that’s not always the case. Read More
A Sector Fund invests in a specific sector of the economy, such as health care, energy or utilities. Sector funds come in many different flavors and can vary substantially in market capitalization, investment objective (i.e. growth and/or income) and class of securities within the portfolio. Sector funds do not fall into a particular category, such as large-cap value or mid-cap growth; instead, they are ranked and analyzed in the following categories:
Alternative Energywind, solar, geothermal, tidal and the burning of alternative fuels Biotechnologypharmaceuticals, genetic engineering, cell and tissue culture technologies Energypetroleum, gas, electricity, nuclear, and renewable energy Financial Servicesbanks, credit card companies, insurance, finance & investment funds Greenrecycling, waste management, environmentally friendly products and manufacturing processes HealthCarehealth care equipment & services and pharmaceuticals, biotechnology & related life sciences Natural Resourcesagriculture, forestry, fishing, hunting and mining Precious Metalsgold, silver, platinum, rhodium, iridium, etc. Real Estatemanufacturing, management & services related to commercial & residential properties or land Technologyhigh-tech manufacturing, communications services, and software and computer-related services Telecommunicationsradio, television, voice communications, and broadband services Utilitiesgeneration and distribution of electricity, gas, water, and steam
ETFs VS Mutual Funds - How to invest in this environment Copyright CNBC