Worth a second look
You know that low-key guy—the one in the next cubicle, or down the street—who's not exactly a hottie, but... he has something going on?
In the investing world, that quiet charmer would be the exchange-traded fund—known by his varsity nickname: ETF.
Profit in your pocket
We've talked about mutual funds (a basket of stocks, bonds, etc.). We've talked about index funds (which track a certain market sector). And you've heard of stocks. Wink.
ETFs are an agile hybrid of all three.
- They're built like mutual funds—to carry a load of investments.
- They trade like stocks, which means you have more control over your buying and selling price.
- More important: ETFs have the internal combustion engine of an index fund: They track a certain sector (U.S. stocks, big companies, real estate, etc.)—and they do it without live managers, so their expense ratios are loooow.
In your portfolio, cheap is good because, over time, your gain is higher. And ETFs just got even cheaper, as a number of firms (including Fidelity and Vanguard) have dropped the trading fee investors once had to pay.
Many investors don't realize the fees they're paying for the mutual funds in their retirement or investment accounts. Do you? Call your fund company and ask. Or grab the ticker and look it up on Morningstar.