Owning mutual funds can be expensive when you consider the 1.5% average charge for advisory fees that go to the broker or financial planner that helps you select the funds. Exchange traded funds (ETF) can be your answer to greater flexibility at a lower cost.

When you purchase a mutual fund you are left in the dark as to what you are getting. Fund managers only are required to disclose their holdings twice a year and that comes with a 30-60 day time delay.

The first ETF’s was the S&P Depository Receipt known as SPDR (exchange symbol SPY). It was basically a stock that owned all 500 companies that make up the S&P 500 Index. So with one trade you could own the whole S&P 500 index.

Professional traders keep the market price of ETFs in line with the value of the underlying stocks by arbitrage of any price disparities. Unlike mutual funds where their price may get distorted in regard to the underlying value, ETFs give a fair deal.

ETFs are liquid in that you can buy and sell them at any time. You can place stop-loss and limit order as protection. You can see the latest quote in real-time.

The expenses to own an ETF is negligible. For instance, fees for SPY (S&P 500 index ETF) are pegged at 0.09 percent.

When you own an ETF you know exactly what you have invested in. There is no surprise in regards to anything mysterious. There is complete transparency.

Many feel that EFT’s beat mutual funds by a large margin. Mutual funds have shortcomings that glare into the face of any serious investor. Unless one has complete faith in the fund manager for this type of “hands-off” negotiation one may get in trouble.

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