Do you know what’s hid­ing in your ETF?

Miami Herald - - FRONT PAGE -

Ex­change-traded funds have swept the stock mar­ket over the past decade and been a bless­ing for many in­vestors. But while large in­dex-based funds, such as those that track the Stan­dard & Poor’s 500, may fairly rep­re­sent the in­dex’s stocks, smaller niche ETFs don’t al­ways de­liver strictly what their names prom­ise, and you might wind up in­di­rectly buy­ing a lot of some­thing you didn’t re­ally want.

This doesn’t mean you should avoid ETFs en­tirely. Af­ter all, top in­vestor War­ren Buf­fett rec­om­mends S&P in­dex ETFs as the top choice for most in­vestors. But if a tightly fo­cused in­vest­ment is what you’re af­ter, you have to know what’s in your fund.

So why bother with ETFs? In­dex mu­tual funds are sim­i­larly cheap and diver­si­fied, but they don’t of­fer ETFs’ flex­i­bil­ity and fo­cus. ETFs trade through­out the day like stocks, while mu­tual funds are priced and traded at the end of the day. So in­vestors can move in and out of ETFs quickly and eas­ily.

Plus, ETFs of­fer an in­creas­ing

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