What Black Folks

Should REALLY Know

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EXCHANGE TRADED FUNDS

(An Alternative to Mutual Funds)

High fees and performance in mutual funds has caused many mutual fund owners to run looking for investment products that have lower fees and  options that will help their portfolio maintain consistent growth.

Exchange Traded Funds (EFTs) have the following characteristics:

* Priced throughout the day
* Can be placed with market limits or stop loss orders
* Unlike mutual funds, EFTs have put and call options based on many of them.

EFTs do not have much asset turnover and their expense ratios are far lower than the most cost efficient managed funds.

The first EFT ever offered was Standard & Poors Depository receipts, known as spiders and their expense ration was a very nominal 0.11%. 

EFTs with even lower expense ratios include:

* Barclays shares S&P 500 Index
* Vanguard 500 Index's

Low fees can add up to hundreds of dollars in your pocket and the only concern you may have as an investor in EFTs is transition cost. Please be aware that EFTs can only be purchased via broker.

Overall it can be a wonderful alternative to traditional mutual fund investing.

© 2004 Rick Knight

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