Mutual funds have been touted by financial advisors as the obvious investment choice for their retail clients. But in recent years, there has been a slow and steady trickle of assets from mutual fund portfolios to individual exchange traded funds (ETFs). Financial advisors have noted the trend and came up with a combination of the two.
Low cost, tax efficiency and transparency are the top draws that ETF investors have found over mutual funds, remarks Paul Weisbruch for Minyanville. Some financial advisors are getting on board and starting to use ETFs in a mutual fund strategy as they seek out other ways to achieve benchmark-beating performances through active management.
Managers of “ETF mutual funds” are running risk-controlled capital appreciation, income-generating portfolios or absolute return strategies while using ETFs to outperform the market while trying to mitigate risk. [The Long-Term Cost of High Fees.]
As the industry evolves and fund providers come out with more options, managers of ETF mutual funds are now able to invest in a variety of asset classes, such as commodities, fixed-income, volatility indexes, active management, quantitative strategies and more. [ETFs vs. Index Funds.]
The appeal is easy to see: ETF mutual funds are more tax efficient and more cost efficient than the standard equity or fixed income mutual fund because of the underlying ETF holdings are more tax efficient and don’t require a team of analysts to pick out winning stocks.
For more information on mutual funds, visit our mutual funds category.
Max Chen contributed to this article.
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.