Re:
ETF's, or exchange traded funds, are just that, 'funds' traded on Exchanges. They're 'basket's of stocks, fixed, not managed, and because you trade that basket, there's no management. It can be easily traded. The basket's, as of now, buy indexes, sectors, regions, countries, etc. It does not discriminate by GOOD or BAD investments. The key here was for investors to have MORE liquidity than with Mutual Funds, to save on expenses of management, and to not be "stock pickers."
The benefit is you can trade them like a stick, as in they settle THAT day of buy or sell. They rise and fall like a stock, too, so you would trend trade them, or put them in a portfolio of ETF's that are diversified.
They're also a benefit in Non-Retirement accounts because you don't get stuck with unnecessary gains you wouldn't otherwise have. So for those accumulating assets now, for investment, homes savings, etc, they're a plus. Alot of investors, this year most recently will be stuck with a nice 1099 due to taxes on Cap Gains being distributed from your Mutual Funds.
Mutual Funds are good ACCUMULATING instruments, in that you own stocks supposedly well-picked. There's dividends, cap gains, income distributions, etc, that you benefit from that build your account ( if retirement ). But investors stay TOO long in 1st grade, so they're pissed when their now $10000 or $100,000 doesn't grow much. Well, when you've got under $10,000, they're wonderful. They're still good BEYOND 10k, but you should look at spreading the money around if you're passively investing. And even if you're ACTIVELY investing, there needs to be a portion you're not doing ALL of it, in the case you lose it or lose a significant portion.
The Great Jesse Livermore would make and lose millions. At 1 point, he lost most, if not all of what he had. When he re-claimed his fortune again in short-time, his first action was to put $1,000,000 (which was a LOT then) into an annuity/pension program for himself in case he found himself broke, he'd have THAT income to subsist on. That way, he could FOCUS on growing his TRUE wealth. Granted, not all of us have the luxury beyond just basic retirement savings (whenever you want to retire), but it's a good idea to focus on SEVERAL levels of retirment planning and age target deadlines.
Back to the topic...ETF's are good, but like all investment classes, YOU have to be good, not the investment. It doesn't run itself, so it's not magical. It's ok to trade, but I prefer direct stock investment in a cheap account like Scottrade, which charges $7/trade for stocks over $5. An ETF is good in some cases, poor in others.
A-Unit
