When an investor is investing large sums of money, say more than $5,000, using an exchange traded fund (ETF) is a no-brainer. Commissions are usually low (around $10), and ETFs offer liquidity in that one can trade throughout the day. With mutual funds, everyone gets the same closing price at the end of the day. In most cases, ETFs’ low fees are what attract most investors. However, the commissions can be a turn-off.
For example, let’s say you want to invest a set amount of money each month. These systematic investments would incur a commission for each trade. All these trades can take a large bite out of your returns. What’s an ETF investor to do?
This is an instance where mutual funds can come in handy, says Bill Donoghue for MarketWatch. If investors meet the minimum requirements, they can invest in a full range of no-load funds without any transaction costs. Some may even waive short-term redemption penalties, minimum holding periods and excess trading limits. But make sure you know before you start investing in them.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.