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In general ETFs are excellent investment vehicles. They are liquid and transparent, for one thing – you can always see what they hold, unlike the mutual funds. They also trade in real time, like stocks, and typically have lower management fees. ETF are just better technology than mutual funds. It is no wonder that ETFs are rapidly replacing mutual funds as investment vehicle of choice.
But, in meeting with a number of investment advisors and managers recently, it has became abundantly clear to me that trading ETFs requires additional knowledge and experience. I am not talking about trading larger names such as SPDR Dow Jones Industrial Average ETF Trust (DIA) or PowerShares QQQ (QQQ), for example, but I am talking about most of other exchange traded funds. If you trade such names, the spread between their bid and ask prices tends to be a penny – which is great, of... Continue to read.
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