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Old 06-25-2019, 01:42 PM   #1
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Hi. I am invested with Fidelity,approx $400k,still working at 61yo. Mix of IRA,401 and brokerage acct. I have $10k to invest from the IRA.
I have read how EFTís are a great investment and donít have any in my investments . Is this true ?
I am a hold type investor.

The expertise on this forum is great.

Thank you.
Leslie
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Old 06-25-2019, 02:30 PM   #2
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Have you done any research on your own to understand what an ETF is? It wouldn't appear so to me. I don't mind helping people, but I think you should be willing to do a little bit of work on your own first. Google "What is an ETF" and go from there, and then come back with specific questions about ETFs and their alternatives.
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Old 06-25-2019, 02:38 PM   #3
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I have read how EFTís are a great investment and donít have any in my investments . Is this true ?
Interested in oceanfront property in Arizona? I have one for sale.
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Old 06-25-2019, 02:41 PM   #4
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ETF.COM has a good tutorial
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Old 06-25-2019, 02:44 PM   #5
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Originally Posted by esposla View Post
Hi. I am invested with Fidelity,approx $400k,still working at 61yo. Mix of IRA,401 and brokerage acct. I have $10k to invest from the IRA.
I have read how EFTís are a great investment and donít have any in my investments . Is this true ?
I am a hold type investor.

The expertise on this forum is great.

Thank you.
Leslie
Leslie - There are over 2,000 different ETF's (Exchange Traded Funds). These are similar to mutual funds (e.g. what you might have in your 401(k) except that they are traded on an exchange).

Whether a particular ETF, mutual fund, or any other investment is a 'great investment' cannot be answered. What you need to understand is what you are currently invested in, where you are in terms of working/planning for retirement, your risk tolerance and a bunch of other factors. Anyone who tells you "buy the SPY ETF, it is a great investment" without knowing a bunch more about your specific situation is not helping you.
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Old 06-25-2019, 02:50 PM   #6
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Interested in oceanfront property in Arizona? I have one for sale.


Haha
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Old 06-25-2019, 02:55 PM   #7
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Leslie - There are over 2,000 different ETF's (Exchange Traded Funds). These are similar to mutual funds (e.g. what you might have in your 401(k) except that they are traded on an exchange).



Whether a particular ETF, mutual fund, or any other investment is a 'great investment' cannot be answered. What you need to understand is what you are currently invested in, where you are in terms of working/planning for retirement, your risk tolerance and a bunch of other factors. Anyone who tells you "buy the SPY ETF, it is a great investment" without knowing a bunch more about your specific situation is not helping you.


Thank you . Ive worked with advisor, but this type of fund wasnít talked about . Iíve read a few articles and ,frankly, they are over my head ómaybe not way over ;I m hesitant to use my usual method of selecting a fund. Iíll try getting educated and give it some time. I know the stock sector I need but though to use alternative to MF.
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Old 06-25-2019, 02:56 PM   #8
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ETF.COM has a good tutorial


Thank you, Iíll try it
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Old 06-26-2019, 06:16 AM   #9
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Thank you . Ive worked with advisor, but this type of fund wasnít talked about . Iíve read a few articles and ,frankly, they are over my head ómaybe not way over ;I m hesitant to use my usual method of selecting a fund. Iíll try getting educated and give it some time. I know the stock sector I need but though to use alternative to MF.
Mutual funds are just fine. If you find ETFs confusing, I suggest you simply continue to use MFs.

There isn't anything fabulous or special about ETFs.
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Old 06-26-2019, 06:27 AM   #10
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Expense Ratios.
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Old 06-26-2019, 06:41 AM   #11
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Thank you . Ive worked with advisor, but this type of fund wasn’t talked about . I’ve read a few articles and ,frankly, they are over my head —maybe not way over ;I m hesitant to use my usual method of selecting a fund. I’ll try getting educated and give it some time. I know the stock sector I need but though to use alternative to MF.
Open Ended Mutual Funds determine their price per share at the end of the day's trading. They calculate this Net Asset Value (NAV) by looking at all of their holdings and dividing by the number of shares. They allow purchases and sales using this NAV calculation. (Note, this requires that they keep a little bit of that NAV set aside in cash so that they can pay out if there are more shares being sold on that day vs buy. They can also limit or adjust sale prices in certain circumstances, e.g. if they had a huge influx of sell orders that day, they could insist that the following day price be used to allow them to sell assets.)

ETF's (Exchange Traded Funds) are like a mutual fund in that they own underlying assets. Some ETF's are very broad based, for example the SPY ETF reflects that (mostly) largest 500 public companies in the United States (in terms of market cap). Some are much more narrow, e.g. GLD is an ETF that owns...GOLD. Since they trade (like a stock), it is possible that that asset value of the underlying securities DIFFERS from the price that the ETF is selling for. This is expressed as a premium or discount to underlying NAV. However, this typically isn't an issue for large ETF's that are actively traded, because there are mechanisms where new shares can be created or removed which acts to keep the tracking error small. (For instance, there is a procedure by which SPY shares can be 'created' by supplying the underlying shares of the 500 companies in the SP 500 index).

So, ETF's have the advantage that they can be purchased during trading and you would get that price as of that moment (as compared to end of day pricing only). ETA: So, ETF's have the disadvantage in that they can be easily traded - don't do this.

You should also be comparing fees associated with mutual funds and ETF's. While one might think that ETF fees would be higher, this is not necessarily the case. For instance, SPY's gross expense ratio is 0.0945%.

Here's an example of information: https://us.spdrs.com/en/etf/spdr-sp-...hoCsZ0QAvD_BwE


From a personnel perspective, I have both mutual funds and ETF's. Mostly mutual funds in my 401(k)/457(b), but I use ETF's in my IRA/taxable account. (For that matter I have individual equities).

What you should be looking at is your overall strategy: What your asset allocation is, what your risk tolerance is. Whether something should be invested in a particular mutual fund or ETF comes AFTER understanding your investment strategy.

Hope this helps, and feel free to ask questions.
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Old 06-26-2019, 01:54 PM   #12
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Mutual funds are just fine. If you find ETFs confusing, I suggest you simply continue to use MFs.

There isn't anything fabulous or special about ETFs.

MFs might be just fine or they might be sucking up half your returns with management fees - this may be what EarlyBirdly was implying. Costs matter so I would be discussing these with my advisor.
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Old 06-26-2019, 01:59 PM   #13
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MFs might be just fine or they might be sucking up half your returns with management fees - this may be what EarlyBirdly was implying. Costs matter so I would be discussing these with my advisor.
ETFs can have high fees too. https://etfdb.com/compare/highest-expense-ratio/
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Old 06-26-2019, 02:05 PM   #14
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Yup. MFs are neither better nor worse that ETFs when it comes to fees, IMO.

I suggest using a 3 fund portfolio w/ index MFs - you can get your fees pretty darn close to 0% these days.
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Old 06-26-2019, 02:50 PM   #15
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Thank you, Iíll try it


Started watching and reading about ETF. Great suggestion, thank you . I like the presentation format and will continue reading. Iíll get thru it and also the other comments here.
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Old 06-26-2019, 02:52 PM   #16
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Mutual funds are just fine. If you find ETFs confusing, I suggest you simply continue to use MFs.



There isn't anything fabulous or special about ETFs.


Thanks, I may do just that. If I find digesting the reading too much, Iíll keep it simple .
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Old 06-26-2019, 05:28 PM   #17
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MFs might be just fine or they might be sucking up half your returns with management fees - this may be what EarlyBirdly was implying. Costs matter so I would be discussing these with my advisor.
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Quote:
Originally Posted by mrfeh View Post
Yup. MFs are neither better nor worse that ETFs when it comes to fees, IMO.

I suggest using a 3 fund portfolio w/ index MFs - you can get your fees pretty darn close to 0% these days.
Yes some ETFs can have high fees as the Financial Advice 'Industry' is always going to try to get its piece but generally less likely to be the case. And as I was trying to point out, apparently ineffectually, fees matter - even ultralow cost index funds can be ruined by AUM and other fees bundled on top of them.
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Old 06-26-2019, 07:36 PM   #18
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70% of our portfolio is allocated to ETFs of various forms... VUG, VOT, VBK, VHT is our highest fee at .1 Our overall expense ratio for our portfolio is .039% I am not complaining.

we stay away from sector ETFs (for the most part) VHT has done well for us.
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Old 06-26-2019, 07:38 PM   #19
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Wanted to add, a lot of institutions have an Index to ETF comparison tool if you want to plug n play and basically swap one index fund like VIMAX for an ETF like VTI or something.

Probably a bad example but you get the idea.
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FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 06-27-2019, 05:04 AM   #20
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Open Ended Mutual Funds determine their price per share at the end of the day's trading. They calculate this Net Asset Value (NAV) by looking at all of their holdings and dividing by the number of shares. They allow purchases and sales using this NAV calculation. (Note, this requires that they keep a little bit of that NAV set aside in cash so that they can pay out if there are more shares being sold on that day vs buy. They can also limit or adjust sale prices in certain circumstances, e.g. if they had a huge influx of sell orders that day, they could insist that the following day price be used to allow them to sell assets.)

ETF's (Exchange Traded Funds) are like a mutual fund in that they own underlying assets. Some ETF's are very broad based, for example the SPY ETF reflects that (mostly) largest 500 public companies in the United States (in terms of market cap). Some are much more narrow, e.g. GLD is an ETF that owns...GOLD. Since they trade (like a stock), it is possible that that asset value of the underlying securities DIFFERS from the price that the ETF is selling for. This is expressed as a premium or discount to underlying NAV. However, this typically isn't an issue for large ETF's that are actively traded, because there are mechanisms where new shares can be created or removed which acts to keep the tracking error small. (For instance, there is a procedure by which SPY shares can be 'created' by supplying the underlying shares of the 500 companies in the SP 500 index).

So, ETF's have the advantage that they can be purchased during trading and you would get that price as of that moment (as compared to end of day pricing only). ETA: So, ETF's have the disadvantage in that they can be easily traded - don't do this.

You should also be comparing fees associated with mutual funds and ETF's. While one might think that ETF fees would be higher, this is not necessarily the case. For instance, SPY's gross expense ratio is 0.0945%.

Here's an example of information: https://us.spdrs.com/en/etf/spdr-sp-...hoCsZ0QAvD_BwE


From a personnel perspective, I have both mutual funds and ETF's. Mostly mutual funds in my 401(k)/457(b), but I use ETF's in my IRA/taxable account. (For that matter I have individual equities).

What you should be looking at is your overall strategy: What your asset allocation is, what your risk tolerance is. Whether something should be invested in a particular mutual fund or ETF comes AFTER understanding your investment strategy.

Hope this helps, and feel free to ask questions.


Thank you for the explanation . Thereís is a lot to learn and not sure Iím up for it but giving it a try. Iím learning about strategy and what my goals should be. The ER is the 1st filter I use when searching for a fund. I thought to start managing my investment more intelligently so Iím taking my timeóbut started later in life than ideal.

I donít know if waiting to understand investment strategy before investing is required though, When 401k was offered 25 years ago, I just jumped at the chance to save a little .

My dear dad retired early and spent time learning about investing . He said itís smart to watch after your hard earned $$.

Thank you again .
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