Buying ETFs accelerates returns for mutual fund owners. Making the change to ETFs can accelerate and give an immediate boost to investment returns.
How do ETFs improve investor returns?
Money Choices That Grow Wealth course 250, lesson 14, answers the question, how do ETFs improve investor returns? At the end of the lesson, links to related content help you learn more.
What you learn:
For some, switching to Exchange Traded Funds or ETFs offers to more than double returns! That is a change worth making!
Investors get low cost keeping market exposure
An ETF with exactly the same holdings as a mutual fund can double investor returns! Even greater improvements are possible! ETFs have a huge cost advantage over mutual funds. That makes all the difference!
Key point in this comparison: real net liquidated return. That is money actually in the investor’s pocket after all costs. Those are not the progressive annual numbers mutual funds have reported. Some mutual fund company reports are close to nonsense. Too often mutual fund purveyors obscure the real cost. This is done on purpose. Regulators let this clever legal ripoff scheme continue.
Superior investors inform themselves and take action to avoid these financial traps. Few investors are capable of seeing through the dense smoke. The mutual fund industry has done an excellent job of keeping costs well obscured. Financial service industry players from top to bottom feast on this booty. Because so many feed so well, there is little chance of change. That means, year after year, little change happens to the ripoff scheme.
Time for a change… just not now or fast
It will be up to you. Regulators are well aware of the issue. They will do little. Some regulators are chattering as they did the year before and the year before that and…well you get the idea. Proposed regulations require clear reports on compensation and performance.
Canadian banks harvest huge returns from mutual fund related fees. That revenue accounts for the stellar banking and wealth management sector returns. Banks will fight any proposed change to protect those fat profits. Banks want nothing to do with full or clear plain disclosure.
Banks turn loose legions of lawyers to fight any change. This will take some time. Those fine legal minds will see to it that obscuring full costs remains legal. Don’t expect any real help from regulators.
If they were required, full clear cost reports would shock many mutual fund holders. That would benefit everyone except the financial advisors milking mutual fund fees from clients. It could mean some awkward meetings between advisors and clients. But the market, not regulators offers hope to meet the needs of the investing public.
The ETF Difference
A market innovation, ETFs offer all the advantages of mutual funds at a fraction of the cost. And they provide far better reports to investors. So avoid the outrageous cost of mutual funds. Buy ETFs for a practical, available alternative.
The big difference? The huge cost advantage. An ETF gives you a sharp reduction in cost. The difference goes into your pocket. Compounded over years, that makes a huge difference to your wealth.
Most basic ETF holdings are very much like a mutual fund. That means ETFs give exactly the same market exposure. Compared to mutual funds they offer greater numbers of market opportunities. For those holding the same equities, the performance and participation will be the same. But at a fraction of the costs for a mutual fund.
As with mutual funds there are thousands of ETFs offered. For investors ETFs present two major and important differences:
- Public Listing: ETF shares or units trade on stock exchanges
-
Management Expense: ETFs have exceptionally low costs
1. Public Listing
Being listed means that ETF shares trade like any stock on a stock exchange. That makes them easy for any investor to buy. It also makes them easy to sell. Unlike mutual funds, any buyer or seller can see minute by minute price action on exchanges. At best, mutual funds price once a day in a process only seen by the mutual fund company personal.
Investors can buy or sell their full position anytime during market hours. There are no selling restrictions or limits as happens with some mutual funds.
Any investor can gain access to the market with an investment account. In Canada that means dealing with one of the bank owned dealers or the handful of independents. In America retail investors have a much wider choice among dealers to select from.
The markets of both nations offer investors many choices. In future conversations we discuss the process of selecting a dealer or financial advisor.
2. Management Expenses
The design and structure of mutual funds began centuries ago. Before electronics their base was built on paper records and face to face transfers. The deal structure fit the times. A cutting edge idea for that time involved man people and all the associated costs. That meant management, bureaucracy and space to accommodate them all. All that brings costs.
In contrast, ETFs are a product of the digital age. They have the cost and efficiency advantages that lower expenses. Their sales channel bypasses the obsolete mutual fund distribution model. They need few people, little space and simple management structure. Those differences bring far less cost.
You can take advantage of these huge cost savings! Put the ETF advantages to work building your wealth. The next lesson in this course details those huge cost differences. The details will shock your wallet!
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Money Choices Grow Wealth,
lesson links:
Introduction to Money Choices That Grow Wealth Lesson 1
3 Stock market approaches Lesson 2
Income, value and growth investing Lesson 3
3 Distinct investing approaches Lesson 4
Aggressive trading chases profit Lesson 5
Momentum investing trading play Lesson 6
Speculation returns for big risks! Lesson 7
Risks complicate spectacular returns Lesson 8
Speculation failures improve investing Lesson 9
Middle trader thinking differs Lesson 10
Investing trading and speculating differ Lesson 11
Buying ETFs accelerates returns Lesson 12
Next course:
How Investors Track Money
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Bryan
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