Daily Investment Tips

An ETF is similar to an open-end mutual fund in that they both offer investors a pool of securities that consist of stocks or bonds.

But the difference between ETFs and Mutual funds is like day and night

ETF Vs Mutual Funds – Difference in How they trade

The first difference between ETF and mutual funds is in how they trade. ETFs trade like a normal stock in the stock exchange. Their prices move up and dwon throughout the day, allowing ETF investors to buy and sell anytime the markets are open.

Mutual funds, on the other hand, settle at the close of business, meaning that investors must wait to redeem or buy based on a mutual fund’s net asset value after the close of business.

Tax Efficiency

ETFs also tend to be more tax-efficient because they typically generate relatively low capital gains from fund distributions. ETFs usually have lower turnover of securities because they are not required to sell securities to meet investor redemptions, like mutual funds. When a mutual fund sells securities, it must pass along the capital gains to shareholders, even though the shareholders have not redeemed their shares.

Difference In Fees

ETFs do not charge redemption fees, and typically have lower expense ratios than mutual funds. However, every time an investor buys or sells an ETF, he or she pays a brokerage commission. For aggressive traders, these brokerage fees can quickly exceed the lower annual fees that ETFs usually charge.

Mutual funds on the other hand charge a redemption fees, they also charge annual fees which can be based on your invested amount plus a share of your profits.

written by Constantine Njeru \\ tags: Capital Gains, Etf, Expense Ratios, Mutual Fund, Mutual Funds, Redemption Fees, Tax Efficiency

Businessweek has a story about investment funds that have invested in Facebook. This funds are providing retail investors with a means to invest indirectly into facebook.

Facebook Funds

EB Exchange Funds, based in San Francisco, along with New York firms Felix Investments and GreenCrest Capital, have opened Facebook funds.

Since you cant buy facebook stock directly you instead buy into the fund just like you buy a mutual fund.

Read the full story at businessweek facebook.

There is no doubt facebook is the biggest story since Google. Those investors who were lucky to get in early are smiling all the way to facebook IPO date. Funds such as EB exchange have given retail investors another window to get a piece of facebook.

Although Facebook is still a private company investors have been able to buy stock of the company. Stock of Facebook trade on a private-company stock market. The market is known as Secondmarket.

Although there is a secondary market it is extremely hard for outsiders to even get a single stock. The funds have provided another window to get into facebook.

written by Constantine Njeru \\ tags: Businessweek, Buy Stock, Company Investors, Company Stock, Exchange Funds, Facebook, Felix, Google, Greencrest, Investment Funds, Investments, Mutual Fund, No Doubt, Outsiders, Private Company, Retail Investors, San Francisco, Stock Funds, Stock Ipo, Stock Market, Stock Trade

I found some interesting comparisons of returns of index fund and mutual funds.

From motley Fool website;

During the 1990s, the S&P 500 has provided an annualized return of 17.3%, compared with just 13.9% for the average diversified mutual fund.

And From Yahoo

In 1998, for instance, 85 percent of all mutual funds that were set up to beat the S&P 500 failed to meet that goal. When you think about it, that’s an amazing statistic — eight out of ten mutual funds didn’t beat the market!

Investing in a stock index fund guarantees that you’ll never outperform the overall but an index fund might give investors a higher return because of their cost advantage. Index funds have lower or zero fees, they also don’t hire expensive equity analyst. All that saving is passed to investors.

written by Constantine Njeru \\ tags: 1990s, Amp, Annualized Return, Cost Advantage, Equity Analyst, Guarantees, Index Funds, Investor Returns, Investors, Motley Fool, Mutual Fund, Mutual Funds, Statistic, Stock Index Fund, Yahoo, Zero Fees

James C. Boogle is the founder of The Vanguard group,  a mutual fund that allows retail investors invest in the movement of S & P 500. The fund owns 500 stocks — all the companies that are included in the index.

James C. Boogle is a champion of investing in index funds. He believes index funds have three advantages over the traditional mutual funds.

The Advantages of Investing in Index fund.

Low Cost fees – Vanguard funds don’t charge commission fees to buy into the fund

Higher return to investor – Vanguard funds don’t hire expensive stock analysts, don’t rapidly move in and out of position. This saves on operational cost. The money saved is moved that is distributed to investors as gains.

Stable Return. Vanguard fund never claims to beat the index. The returns are average but stable.

written by Constantine Njeru \\ tags: Amp, Boogle, Champion, Index Fund, Index Funds, Investment Tips, Investor, James C, Money, Mutual Fund, Operational Cost, Retail Investors, Stock Analysts, Stocks, Traditional Mutual Funds, Vanguard Fund, Vanguard Funds, Vanguard Group

The Vanguard group is a mutual fund that allows retail investors invest in the movement of S & P 500.The fund owns 500 stocks — all the companies that are included in the index.

If you are interested in investing in Vanguard fund and you may be interested to know its advantages.

The Advantage of Investing in Index fund.

Low Cost fees – Vanguard funds don’t charge commission fees to buy into the fund

Higher return to investor – Vanguard funds don’t hire expensive stock analysts, don’t rapidly move in and out of position. This saves on operational cost. The money saved is moved that is distributed to investors as gains.

Stable Return. Vanguard fund never claims to beat the index. The returns are average but stable.

written by Constantine Njeru \\ tags: Amp, Fund Investment, Index Fund, Investing, Investment Group, Investment Tips, Investor, Money, Mutual Fund, Operational Cost, Retail Investors, Stock Analysts, Stocks, Vanguard Fund, Vanguard Funds, Vanguard Group, Vanguard Investment