Friday, April 27, 2012

ETFs are like the Internet while Mutual Funds are the Newspaper Says WisdomTree CEO

I tend to agree with his statement.

"The ETF is to the mutual fund, what the internet is to the newspaper," Steinberg says in the attached video, shot after a panel discussion on the issue hosted by the New York Stock Exchange. "Because of the added functionality, full transparency, greater liquidity, greater tax efficiency, those characteristics are so important for investing. That's why I think it's a better mouse trap."

They are much easier to deal with than Mutual Funds for the most part and you don't have to worry about having a $2500 minimum in order to buy one. You can also put a nice stop loss on them just in case you want to get out of the position in a down market. With a mutual fund you have to put in a sell order and wait for the next day before it is filled. You might miss an opportunity in the meantime. You also don't have to worry about a weird capital gain or a tax bill showing up at the end of the year.

Amazingly, in the vastly growing universe of some 1,500 different exchange traded products, there are currently 47 actively managed ETFs to choose from, meaning the remaining 97% of products fall into the passive, unmanaged or specialty categories. Of those 47 actively managed funds, Steinberg's firm currently runs 14 of them, giving them a quick lead in a market segment that he says is set for "literally trillions and trillions and trillions of future growth."

The only problem I have with managed ETFs is that some of them are hardly traded and I just don't like buying a security that has a daily volume of 200-600 shares or something. It just makes me feel like I would be getting a poor price when I get into a product like that.

No comments: