Mutual funds versus exchange traded funds?
- Alan Lavine and Gail Liberman
Mutual funds and exchange traded funds both pool money to invest.
With mutual funds, you only purchase shares once daily. No-load funds--with no commission--can be purchased directly from a mutual fund company.
By contrast, you must purchase exchange traded funds through a broker and pay a commission. Like stocks, exchange traded funds are traded continuously on a stock exchange.
Consider exchange traded funds:
If you're making a large lump sum investment.
If you might want to trade your funds during the day.
If you want to engage in fancy footwork, like short selling, which you can't do through a mutual fund. With short-selling, you borrow a security and sell it, with the aim of buying it back later at a lower price.
If you want to make an investment unavailable through mutual funds, such as gold bullion.
Consider mutual funds:
If you expect to make small periodic investments or dollar cost average.
If you want a specific investment, like a type of bond fund, which lacks a comparable exchange traded fund.
Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Rags to Retirement (Alpha Books)." You can e-mail them at MWliblav@aol.com.
To read more columns, please visit the column archive.