ETFs have 6 advantages over mutual funds.
Have you wonder what the differences were between Exchange Traded Funds (ETF) and mutual funds? Listed below are six advantages that ETFs have over mutual funds.
If you have an affinity for a particular segment of the market, there’s probably an ETF that covers it.
- Lower Costs. The average expense ratio for large-cap equities: Mutual funds charge 1.37% and ETFs charge 0.44%. Similar expense discounts carry throughout all categories.
- Tax Efficiency. ETFs are more tax-efficient than active or passive mutual funds. Across domestic and international equities, investors get hit with an average tax bite of 3.19% on active mutual funds … 0.45% on passive mutual funds … and 0% on ETFs.
- Intraday Trading. ETFs are basically mutual funds that trade like stocks. That means they’re liquid, continually priced, easily redeemable, eligible for margin, approved for short-selling and can be traded with market, limit and stop-loss orders. What’s not to like?
- Transparency. ETFs offer daily disclosure. Mutual funds do not.
- Better Performance. Active managers consistently underperform their benchmarks. 80% underperformed in 2015 (85% in 2014). Even in the categories where active equity managers are supposed to have an edge, they’re failing investors.
- Access to Anything. With 1,800-plus ETFs, you can get access every nook and cranny of the markets you want.
Dan
