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Treasured Social Butterfly
Posts: 4,042
Registered: ‎04-07-2015

Re: In Defense of Mutual Funds

Message 1 of 9 (2,455 Views)

3278443860 wrote:
It's admirable to not add necessary clutter and distraction to one's life. I understand. But in the case of ETFs, I urge you to consider the one very important feature they have. The ETFs actually resurrect trading features that mutual funds lost when the legal form of their contracts were written.

If you place a mutual fund order, then walk away from your computer, go back to work, go to the park, whatever, and the market goes stark raving nuts, and you can't get back in to cancel your order, you have absolutely no idea what price you're going to get at the end of the day. You could get jacked up all over the place.

With ETFs, like stocks, you can place limit orders, sell-stops, buy-stops, stop-limit orders, good-til-cancelled orders... things that protect you when markets go whacky. Stock traders have always used these devices... mutual fund owners have been unable to... ETFs bring it all back. And the orders fill in the blink of an eye, unless the market is melting down.

And they are CHEAP. They have started a price war with mutual funds, but they are still cheaper.

@3278443860

 

I neglected to thank you for posting such a helpful and detailed comment about EFTs. I appreciate your willingness to share what you know, and hope it will help others looking to switch up their market positions.

The key to success is to keep growing in all areas of life - mental, emotional, spiritual, as well as physical. - Julius Erving
Treasured Social Butterfly
Posts: 4,042
Registered: ‎04-07-2015

Re: In Defense of Mutual Funds

Message 2 of 9 (2,462 Views)

3278443860 wrote:
It's admirable to not add necessary clutter and distraction to one's life. I understand. But in the case of ETFs, I urge you to consider the one very important feature they have. The ETFs actually resurrect trading features that mutual funds lost when the legal form of their contracts were written.

If you place a mutual fund order, then walk away from your computer, go back to work, go to the park, whatever, and the market goes stark raving nuts, and you can't get back in to cancel your order, you have absolutely no idea what price you're going to get at the end of the day. You could get jacked up all over the place.

With ETFs, like stocks, you can place limit orders, sell-stops, buy-stops, stop-limit orders, good-til-cancelled orders... things that protect you when markets go whacky. Stock traders have always used these devices... mutual fund owners have been unable to... ETFs bring it all back. And the orders fill in the blink of an eye, unless the market is melting down.

And they are CHEAP. They have started a price war with mutual funds, but they are still cheaper.

@3278443860

 

Heh, you took the conversation to technology. I just used it as illumination. Smiley Happy 

 

So anyway, I have been reading up on ETFs and have all but ruled them out precisely because of these added features. 

 

I'm not saying they aren't a fantastic product for the right person, I'm saying I'm not that person. Here's why: I have had six careers. I left each one after I won an award or achieved the goal/objective. I reached those pinnacles quickly (I'm 57) because I obsessed with each career. Intense focus, let's call it.

 

You see where I'm going with this. 

 

Here now the rub: my current career is getting us ready for retirement. Yes, that includes finances, and how. It also includes many other moving parts. I cannot afford to obsess about the market.

 

And I would.

 

Missy Miss A-type here needs to learn to relax far more than she needs to conquer the market. Smiley Happy

 

The key to success is to keep growing in all areas of life - mental, emotional, spiritual, as well as physical. - Julius Erving
Frequent Social Butterfly
Posts: 227
Registered: ‎05-28-2011

Re: In Defense of Mutual Funds

Message 3 of 9 (2,465 Views)
It's admirable to not add necessary clutter and distraction to one's life. I understand. But in the case of ETFs, I urge you to consider the one very important feature they have. The ETFs actually resurrect trading features that mutual funds lost when the legal form of their contracts were written.

If you place a mutual fund order, then walk away from your computer, go back to work, go to the park, whatever, and the market goes stark raving nuts, and you can't get back in to cancel your order, you have absolutely no idea what price you're going to get at the end of the day. You could get jacked up all over the place.

With ETFs, like stocks, you can place limit orders, sell-stops, buy-stops, stop-limit orders, good-til-cancelled orders... things that protect you when markets go whacky. Stock traders have always used these devices... mutual fund owners have been unable to... ETFs bring it all back. And the orders fill in the blink of an eye, unless the market is melting down.

And they are CHEAP. They have started a price war with mutual funds, but they are still cheaper.

Sincerely,
Peter
Trusted Social Butterfly
Posts: 7,094
Registered: ‎02-14-2008

Re: In Defense of Mutual Funds

Message 4 of 9 (2,477 Views)

"...Heh. Never let it be said that I'm an early adopter. I'm not of the opinion that new is best or that technology is always the right way to go. I try to find what works best for me, and keep it employed as long as it efficiently fulfills its job......Case in point: I have never had a cell phone......".

 

We're with you. We now, do have, two cell phones used primarily for travel. But they're $15 flip phones. We have no reason to have smart phones. I did break down and get a tablet just last year, again, for travel. That is helpful, I have to admit. Sits in a drawer when not traveling. I don't see the allure of all the latest tech. Everywhere we go we see virtually everyone staring at their phones --- always reminds us of Invasion of the Body Snatchers......  

 


Just think. The world was built by the lowest bidder.
Treasured Social Butterfly
Posts: 4,042
Registered: ‎04-07-2015

Re: In Defense of Mutual Funds

Message 5 of 9 (2,486 Views)

3278443860 wrote:
I still think the 1980s New Wave music is the best. But I have given up certain things; like my pulse-dial phone I used to have because I refused to pay PacBell extra money per month for Touch-Tone. I don't use a 300 baud modem any longer, in fact, I don't have a traditional land-line... it's VoIP.

Heh. Never let it be said that I'm an early adopter. I'm not of the opinion that new is best or that technology is always the right way to go. I try to find what works best for me, and keep it employed as long as it efficiently fulfills its job.

 

Case in point: I have never had a cell phone. If and when I have a practical use for one, I'll consider getting one. Until then it's just something to spend money on for no real gain. Pass.

 

You see how I am. Smiley Happy

 

 

The key to success is to keep growing in all areas of life - mental, emotional, spiritual, as well as physical. - Julius Erving
Frequent Social Butterfly
Posts: 227
Registered: ‎05-28-2011

Re: In Defense of Mutual Funds

Message 6 of 9 (2,495 Views)
I still think the 1980s New Wave music is the best. But I have given up certain things; like my pulse-dial phone I used to have because I refused to pay PacBell extra money per month for Touch-Tone. I don't use a 300 baud modem any longer, in fact, I don't have a traditional land-line... it's VoIP.

Sincerely,
Peter
Treasured Social Butterfly
Posts: 4,042
Registered: ‎04-07-2015

Re: In Defense of Mutual Funds

Message 7 of 9 (2,503 Views)

3278443860 wrote:
Epster, would you consider using ETFs in addition to or instead of mutual funds? Personally, I am all ETF except for one very specialized long-short commodity mutual fund, LCSAX, which does not come in ETF format. I do not pick individual stocks.

The fees of ETFs are much lower even than mutual funds. For example... Vanguard's S&P500 ETF's expense ratio is 0.05%. So for a $1,000,000 position, $500 annually in expenses. Can't get much cheaper. Most mutual funds have ETF cousins, so why use mutual funds?

Mutual funds are so... 1980s!

Yes, but then so am I so 1980 .. ahem. Smiley Happy

 

Interesting question and timing as the very top of my to-do list this week is to call Vanguard regarding some of their ETFs.

 

So ... short answer: yup. Smiley Happy

 

Now, about that 80s slam ... well I never. Smiley Happy

The key to success is to keep growing in all areas of life - mental, emotional, spiritual, as well as physical. - Julius Erving
Frequent Social Butterfly
Posts: 227
Registered: ‎05-28-2011

Re: In Defense of Mutual Funds

Message 8 of 9 (2,512 Views)
Epster, would you consider using ETFs in addition to or instead of mutual funds? Personally, I am all ETF except for one very specialized long-short commodity mutual fund, LCSAX, which does not come in ETF format. I do not pick individual stocks.

The fees of ETFs are much lower even than mutual funds. For example... Vanguard's S&P500 ETF's expense ratio is 0.05%. So for a $1,000,000 position, $500 annually in expenses. Can't get much cheaper. Most mutual funds have ETF cousins, so why use mutual funds?

Mutual funds are so... 1980s!

Sincerely,
Peter
Treasured Social Butterfly
Posts: 4,042
Registered: ‎04-07-2015

In Defense of Mutual Funds

[ Edited ]
Message 9 of 9 (2,577 Views)

I understand folks here dislike mutual funds. And that's certainly fine, however it might be helpful to those who have no such leaning to hear about them from an investor who isn't down on them.

 

Here's my thinking on mutual funds:

 

Educate yourself about yourself. I mean: find your risk tolerance. I like having industry pros and online educational resources available to me at no cost. Goodie: my well-regarded fund provides that. Since we are recovering from a financial set back, am now slightly less tolerant of risk than I was before the recession. (Truth: I have never been big on financial risk. Back in the day when casinos gave away courtesy nickles, I'd claim a roll then deposit same into my checking acct. Not a gambler.)  Ahem. So for me, a Target Date Fund with a good balance of foreign and domestic stock and domestic bonds is perfect because such diversity mollifies risk.

 

Invest in a fund with very low fees. Fees are all over the board: read and understand the fine print before you invest. Know what a low fee schedule is: buy into a plan with same.

 

Invest only a fraction of your total portfolio in mutual funds. I recently read an article about investing heavily in your Target Date Fund to get the most out of it. Hmph. While throughout 2015-16 I did invest aggressively in a Target Date Fund, those funds represent a fraction of our investments. I believe this present financial landscape calls for flexibility and serious diversification. Putting your nest egg in one basket, even one like a Target Date Fund, simply isn't that. Think of diversification as a life raft, able to help you float across the next financial white caps. 

 

Set it and don't forget it. Target Date investing means this is one less thing for me to compulsively monitor. (Wait- is it just me that spends too much time with financial news and views? Yeah, didn't think so...) I check in on it, follow the reports and such, but the ups and downs of the market in the past two years have proven to me the value of a Target Date Fund. No matter what happened: I ended up gaining. Perfect: trusting my long range plan means one less thing on my daily to-do list. Hurrah! More time to devote to really living!

 

So, to recap: know yourself; know your mutual fund; build a big fat life raft and pay attention to market changes w/o obsessing over them. But really, don't listen to me. And don't listen as much to anybody as you do to your educated self, because only you know your goals, but go ahead and read this article: 

 

From Forbes' published Christmas Eve: 2 Beaten-Down Funds To Buy For 9.4% Dividends - And 3 To Avoid

 

2016 has been a crazy year—so it’s no surprise closed-end funds (CEFs) have been offering crazy returns.

 

As we’ll see in a moment, the best fund is up over 50%, which crushes just about every unleveraged ETF and mutual fund out there. Plus, that fund pays a whopping 7.6% yield—which is pretty typical for CEFs. If you bought in when it was at its 52-week low, you would have been getting an unbelievable 14.7% yield throughout 2016, while also seeing your portfolio’s market value go up and up.

 

This is the power of getting into the right CEF at the right time, and it shouldn’t be ignored.

 

 <snip>

 

And if we take a look at both the best and worst CEFs of 2016, we see one common theme: highly concentrated funds were the biggest winners and losers, again teaching us that diversification is key if you want to build a portfolio that outperforms the market and minimizes volatility.

 

The 2 Worst Funds of 2016: Ready to Bounce Back

 

Looking back on 2016, a collapse in healthcare funds almost seems preordained. During the presidential election, Hillary Clinton put pharma companies in the crosshairs, making them a high-risk asset for most of the year.

 

Investors who expected relief from Obamacare critic and now president-elect Donald Trump have been disappointed, as Trump has publicly vowed to tackle drug prices and has backtracked from his earlier commitment to eradicate Obamacare completely. Healthcare stocks have taken a dive ever since.

 

When we look at ETFs, however, the carnage isn’t so terrible.

 

Read the full article here: http://www.forbes.com/sites/michaelfoster/2016/12/24/2-beaten-down-funds-to-buy-for-9-4-dividends-an...

The key to success is to keep growing in all areas of life - mental, emotional, spiritual, as well as physical. - Julius Erving