Your Financial Future
Tuesday, 01 September 2015 00:00
YOUR FINANCIAL FUTURE - What Is An ETF Doing In My Portfolio?
This week my objective is to educate you about an investment vehicle that is becoming ever more
popular. It’s inexpensive to acquire, provides diversification and transparency to an investment
portfolio, and is tax efficient.
If you have not yet heard of an exchange traded fund, also known as an ETF, it is a pooled investment
account made up of shares of stocks, bonds, gold bars, foreign currencies, real estate companies and the
like. If that sounds like a mutual fund, it is similar, but there are distinct differences.
For those not familiar with mutual funds, they are an investment instrument that is comprised of a pool
of funds from many investors. The mutual fund has a stated investment objective and a manager or
management team that strive to provide the investor with income and/or appreciation. Each fund has a
document called a prospectus that outlines its investment objective and strategy, fee and expenses as
well as its past performance.
Mutual funds have been a very popular way for investors to obtain professional assistance in managing
their money since the mid 1920’s; as of September 2014 they held $15.5 billion in assets according to
the Investment Company Institute. They offer diversification, which may reduce the volatility and risk in
a portfolio as the decline in the value of any one stock or bond can be offset by the rise in price of
another. You likely own several mutual funds in your IRA, 401(k) or other savings plan.
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