Exchange traded funds (ETFs) are becoming mainstream for many investors, but they don’t always understand them or know how they are different from a mutual fund. Investors may hear about ETFs or see advertisements; Darla Mercado for InvestmentNews reports that nowadays, advertisements for ETFs can be found in major magazines such as The New Yorker. Education is key to the process and firms are creating more educational tools for investors.
Often times investors turn to their advisor for guidance, but if the advisor isn’t using ETFs, it may be difficult for them to educate their clients. Typically, an advisor who uses mutual funds on a regular basis can have a hard time shifting to ETFs because they’re not used to trading large volumes at once with a moving price.
An ETF, mutual fund battle, if you will, for financial professionals to educate their clients on the two investment tools and how a combination may work for them. Mercado adds that advisors on the whole report having better conversations with a more educated client. When a client has done some of their own research, it helps the entire process. Some advisors feel educating the client is a fiduciary, investment responsibility. We know our readers at ETF Trends are educating themselves and we believe education is a key part of the process.
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.