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Mutual Funds vs ETFs

 
Old 03-15-2007, 05:51 AM
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take a look at VTI. thats what i maxed out my roth with when i could still make contributions. 2006 ended at about ~12%.
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Old 03-15-2007, 09:40 AM
  #12  
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Originally Posted by tcjensen' date='Mar 15 2007, 01:42 AM
cthree,

Similar to the OP's question, I'm 26 and have Edward Jones draft a set amount monthly into my Roth IRA. I have a huge tolerance for risk (I don't even look at it most of the time.) Wouldn't the most volatile portfolio take the most advantage of dollar cost averaging at this point in my life? I'm concerned my rep is too conservative. I don't really care if it looks like I'm losing on paper, even for 3 years. As long as I'm collecting shares, I look at it like everthing's on sale!

Thx for the help,
Tom
I suggest that your tolerance for risk is probably not as great as you think. Be that as it may if you have no interest in managing the money, doing research, etc. then you should put the money with someone who will, ie. a mutual fund. There are lots to choose from, even higher risk ones. Beyond that if you want a higher risk managed portfolio you need to look to a hedge fund but they have very high buy-ins, mid 6 to 7 digits.

A mutual fund will never be "high-risk" because they are limited to playing only the long side of the market (the rising tide) and have to stick to a strict prospectus. Hedge funds can do anything they want, futures, options, long, short, whatever. Mutual funds invest, hedge funds trade.

High risk does not equal high reward. The DOW Chemical stock I bought yesterday shot up over 6% today. It wasn't a high risk investment, it was a smart investment. You get smart through knowledge. You read the annual reports, you read the news (not just the newspaper), you listen to the conference calls, you read the analysts reports, you calculate your risks and potential rewards and then you buy the stock. Somebody needs to do that work, either you or a fund manager. You also need to be a bit lucky.

ETFs are not managed funds, they are indexed. They are baskets of stocks chosen by formula and are great when you want to buy a spread of stocks as a single basket. I own SDY (S&P Dividend SDPR) for my retirement portfolio. I get a basket of stocks which pay the most consistent, increasing dividends. It gets priced throughout the day just like a stock and I can trade 50 stocks with a single symbol and a single commission. If I were to try and create my own basket of dividend paying stocks I'd have to do all of that manually and I'd have to pay commissions on every transaction.

You buy a mutual fund when you want all or part of your portfolio managed (that's why the fund manager is critical to good returns) by someone. You buy an ETF when you just want to buy a basket of stocks meeting some formulaic criteria. You want to buy a basket of South Korean stocks? Buy EWY. There are hundreds of ETFs covering all manner of industries, sectors, regions and other criteria, such as dividend yield. You can even use ETFs to short. Buy QID if you want to short the NASDAQ (bet the index will go down). QID and other short ETFs have twice the risk of their long counterparts so be aware of that.

The higher the risk the more that can go wrong and unless you like flushing $ down the pooper that means higher risk also comes with a greater need to do homework and monitor the investment closely.
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Old 03-18-2007, 02:39 PM
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thx to all for the info
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Old 02-05-2015, 09:00 AM
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resurrecting this old thread for me...

Currently, considering moving my IRA managed by Fidelity (as I understand they only have Mutual Funds?) to Scottrade, which only have ETFs (All the entries in the portfolio the adviser came up with for me were ETFs. No MF).

So far, the only clear advantage I see for Scottrade is lower management fee (0.86% vs. 1.18%) per year. This ETF vs MT, I really don't have a clue other than ETF has lower acquisition fee, tax advantage (although I'm not sure if this applies for IRA, where the gain is shielded from tax anyways?).

Reading this thread, it sounds like ETF portfolios will be less "aggressive" than MF portfolios as they will only try to track the bench marks, rather than beat them, like some of MF will try to do? Also, is it really true that ETF are not "managed?" That's different what I heard from the Scottstrade adviser. So maybe that's why they only charge 0.86% fee instead something bigger?

I have a feeling that even if I move to Scottrade, my account won't grow like a gangbuster but will save money in management fee at least, which will be only about $450 savings per year, which makes me wonder why I am even considering moving my money to Scottrade lol.

I'm looking to retire in about 15 years lol. Any thoughts? Sorry, I'm a noob on finances. Thanks.
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Old 02-19-2015, 12:32 PM
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at age 26 I would opt for a self directed IRA rather than a roth. Assumedly you are in a high enough bracket to get a great savings on the tradtional IRA investment.
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Old 03-06-2015, 03:07 PM
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Some great info in here. I have a lot to learn!
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Old 07-13-2015, 01:28 PM
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i have a roth ira and a traditional one. They both do well and I have a healthy tollerance for risk and spend the few minutes each day happily checking, buying and selling each of them both. I have them 100% invested in individual stocks. I have been active in the market as a home gamer for over 15 years. I recommend individual stocks. When i make money in the IRA it is tax deferred, with the Roth it's tax free.
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