Investing for retirement used to be simple: you could choose between passive funds and actively managed funds. These days, there are more products than ever and it’s up to you to understand them and choose what fits best.
Case in point: closed end funds (CEFs) and exchange traded funds (ETFs). What’s the better bet in your golden years?
Compared to mutual funds, ETFs typically have lower costs, greater transparency and trade throughout the day, comments Joe Mont for TheStreet. [401(k) Fee Disclosures Could Give ETFs a Break.]
CEFs launch as an IPO with a fixed amount of shares that trade on an exchange. Often, these funds focus on a certain theme or strategy and are actively managed. The primary difference between CEFs and ETFs is that you have to get in on the action when the IPO launches or you’ll have to purchase shares on the secondary market. [Rebuilding Your Nest Egg With ETFs.]
However, CEFs don’t offer the same level of transparency found in ETFs. If you are more inclined to invest in a passive strategy, ETFs would be the better option. But if you trust a skilled manager, then CEFs (or actively managed ETFs, which are transparent) may be your choice.