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Exchange-traded funds have become one of the most popular investment vehicles to help diversify an investor’s portfolio. Some compare this investment option to a mutual fund. Independent wealth management advisor Jordan Schwartz of Strategic Wealth Designers joined us on the newscast to discuss the unique advantages of an ETF.
“While some people compare ETFs to a mutual fund, there are differences,” Schwartz says. “An exchange-traded fund is an index of investments, typically comprised of stocks, bonds, and commodities. They are passively managed which means there isn’t a lot of buying and selling which allows for instant diversification, transparency, and low fees.”
When mutual funds are sold, you have to wait until the end of the day to know what they are sold for. A big advantage of exchange-traded funds is that can be traded throughout the day. Fees can also be substantially less for ETFs than those of a mutual fund, which can be as high as 1-3%. ETFs have fees that are significantly lower.
“Studies show that mutual funds underperform the index they were designed to beat almost 80% of the time,” Schwartz says. “Over time, you will likely perform better with a passive investment option, like an ETF, compared to investing in an active investment like a mutual fund. When it comes to management, flexibility, and fee positions, ETFs are generally more advantageous than a mutual fund.”
Not only can exchange-traded funds diversify your investments, but they can also provide other benefits to your portfolio. To see additional stories surrounding business and economic news for Denver area, visit https://KDVR.com/Money and if you have a question for Jordan send an email to email@example.com.