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Investing: ETFs vs. Mutual Funds?

Investing: ETFs vs. Mutual Funds?

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Published by Don't Take Losses
How to choose between ETFs (Exchange Traded Funds and Mutual Funds, what to consider in choosing
How to choose between ETFs (Exchange Traded Funds and Mutual Funds, what to consider in choosing

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Published by: Don't Take Losses on Dec 31, 2009
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06/25/2010

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If you like this, subscribe to:http://www.investortradestocks.com/It's free.Monday, December 28, 2009Investing: ETFs or Mutual Funds? The mutual fund industry is going to be overwhelmed by ETFs. An Exchange TradedFund trades like a stock, the same commission as a stock, you can buy or sell anETF during the day like a stock and does carry not the big management fee of amutual fund. So why buy a Mutual Fund? Some may argue better performance, but itsusually not so. Do a little homework and compare. Ask your advisor how much hemakes from the sale of the mutual fund to you. Then ask him to justify it bycomparing the recommended mutual funds to several similar ETFs. Maybe some mutualfunds are better...but the vast majority underperform.Here is an example of an ETF: XME, one I've held in my IRA most of this year andhave traded in my active taxable account.http://finance.yahoo.com/q?s=xme.This link takes you Yahoo Finance and provides more details than I'll show here.XME is up over 65% this year, including the March collapse time period!Here is the profile of XME: "The investment seeks to replicate as closely aspossible, before expenses, the performance of an index derived from the metals andmining segment of a U.S. total market composite index. The fund uses a passivemanagement strategy designed to track the total return performance of the S&PMetals & Mining Select Industry index. The index represents the metals and miningsub-industry portion of the S&P TMI. The fund is nondiversified." Passive indexingis the key to LOW expenses, FAR lower than any and all mutual funds. And did Imention you can buy and sell it any day, any time of the day, any day of the week?Many mutual funds are like CDs many banks issue, penalty for withdrawing,restricitions on when you can withdraw yada yada. ETFs, you buy, you sell...whenyou want...that's called liquidity and is its most important aspect as I'llexplain later. ETS have tax advantages as well.Back to XME: its a minerals, metals and mining index "fund" in the form of a stock(known as an "ETF"). So its a stock with a basket of these companies (and more)which are the top 10 holdings comprising half of the "fund":TOP 10 HOLDINGS ( 48.67% OF TOTAL ASSETS)Company Symbol % AssetsALCOA INC AA 4.48ALPHA NATURAL RES ANR 4.55ARCH COAL INC ACI 5.3CLIFFS NATURAL CLF 5.51COEUR D ALENE CP NEW CDE 4.49COMPASS MINERALS INT CMP 4.99CONS ENERGY INC CNX 4.85FREEPORT MCMORAN B FCX 4.89MASSEY ENERGY CO MEE 4.55PEABODY ENERGY CORP BTU 5.06Its 67% "industrial materials" and mining stocks and 24% "energy" stocks.Minerals, metals and energy are what companies use to build the world. When

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