ETF, Money Market, and Index Funds
Mutual funds, they make up some of the most basic forms of investments. They play a valuable role in retirement planning. Whether you have Index Funds in the form of an ETF or a traditional mutual fund it’s an excellent way to diversify your portfolio.
ETF funds not only offer that diversification but they do so at much lower costs than a managed mutual fund. ETF’s or Exchange Traded Funds are not actively traded by a traditional fund manager, making the internal costs much more reasonable. ETF’s are traded directly on an exchange and act more like a stock than a traditional mutual fund.
Exchange traded funds offer tax benefits that were previously exclusive to stocks and provide better advantages than traditional funds. One inherit problem with the traditional funds managed actively by fund managers is tax control. Because these company fund managers buy and sell stocks within the fund you’ll get hit with a tax bill come year-end. The great thing about an ETF fund is you can control taxes, selling when you want and even taking advantage of long term capital gains.
If you’re looking for an area to park your money for the short term, a Money Market Fund may be right for you. Money Market funds offer a great way to get a decent rate of return with liquidity. They provide a nice alternative to Certificates of Deposits (CD’s). CD’s often lock you in for long periods of time. Money Market funds provide access to your money when you need it; some will even provide you with a checkbook or ATM card, allowing pure liquidity.
Mutual funds provide an excellent investment tool whether you’re saving for retirement or investing for a particular goal. Money market funds, ETF Funds, and Index Funds all provide a valuable role for your investment goals
