Do you know what’s hiding in your ETF?
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