Braska Posted June 8, 2020 Share Posted June 8, 2020 Help me understand, please. Quote Link to comment Share on other sites More sharing options...
0 Kendi Posted June 9, 2020 Share Posted June 9, 2020 Mutual funds come with many different options to choose from. They are automatically diversified; these are some of the reasons they have been a good investment option for many investors. The goals you have set that you want to achieve from your portfolio and how well you intend to manage your risks may make you leave mutual funds and invest in exchange-traded funds. Investing in either the mutual funds or exchange-traded funds may give you similar benefits. However, ETF may be a better option since they are cheaper, and their taxes are more efficient than mutual funds. The gains in ETF will allure you to investing in them; nonetheless, their several drawbacks that come with ETF. Before you choose to invest in ETF, you should clearly understand what they offer, your goals, and if they are in line with your personal preferences. ETF are like mutual funds, but they trade on a public market. You can deal with different securities when you invest in ETFs, which is usually the same case in mutual funds. The management in ETFs is passive, and the bonds you invest in are the same as that of the index. The liquidity in ETFs can increase if you trade the ETFs on markets of lower levels where assets such as the stocks are traded. Also, trading ETFs on the market will mean that you need not sell any assets to finance the shareholders. You can also use ETFs to reinvest ETF shares in exchange for a good number of stocks in line with your portfolio. One significant benefit of ETF is that their expenses are usually low, unlike in mutual funds. However, when you compare the actively managed and the passively managed ETF, you will find that the actively managed ETF will incur higher costs than the passive, this cost is lower than that of mutual funds. The tax efficiency in ETF comes from the passive investment technique they employ. In ETF, you place a few trades at a time; therefore, you will hardly make any capital gains distributions. The good thing with fewer placements is that they make ETF more tax-efficient relative to other traditional funds. The best time to change your investment option from mutual funds to ETF is when you feel like mutual funds are no longer meeting your investment goals. When you divert from mutual funds to ETF is logical since you will be able to save up more of your profits due to lower costs that come with ETF as against mutual funds. ETF are also an excellent option if you need not generate an annual income from your earnings. Therefore, you will want your investment to increase in value as time proceeds and, at the same time, maintain low taxes that you need to pay from your capital gains. If you are almost retiring, you can invest in ETF through the IRA. Through this, you will magnify your earnings and incur low tax costs. Your earnings will not be subjected to tax until you withdraw them. Mutual funds and exchange-traded funds have their benefits. You need to check whether each of them can achieve the goals you have set for your portfolio. Also, look at the costs that you are incurring in each to evaluate the most cost-efficient option for you. Quote Link to comment Share on other sites More sharing options...
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Braska
Help me understand, please.
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