Exchange-Traded Funds Offer Virtually Free Investing

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Exchange-Traded Funds Offer Virtually Free Investing
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I have a popular feature on my website called Clark’s Investment Guide. Now, I am not an investment adviser, that’s not what I do. But I have a long history going back to my father who taught me when I was in elementary school how to read stock tables.

In the later years of his life, we were in an investment company together that invested in private placements and publicly traded stocks. So I have a longtime interest and education in this field, though it’s not my formal bailiwick.

Unfortunately, I’ve noticed a big gap out there in the field when it comes to knowledge about investing. You have the people who do investment advising for a living and gravitate toward the small sliver of Americans with huge money. And then you have everybody else just looking for where to start and how to start investing…and they don’t know what to do or where to turn!

Exchange-traded funds offer nearly no-cost investing

That’s the point of my guide. I’ve refined it over the years so that today I have sections for beginning, intermediate and advanced investors. In the advanced section of my guide, I discuss what are called exchange-traded funds (ETF). While they take a bit of time to understand, ETFs have today become a routine form of investing for many. Here are some key things to keep in mind:

  • ETFs are the fastest growing type of investing. Now for the first time, there is more than $1 trillion in ETFs. What makes them so special is their structure versus traditional mutual funds or even an index fund.
  • An ETF has an ultra low cost and typically owns a huge number of stocks, almost identical to a Vanguard index fund. But ETFs are not bought and sold like a mutual fund, but rather like a stock.
  • They have management fees that are almost invisible. While the typical mutual fund can have an annual management fee of 1.5%, with an ETF that management fee is more like one-tenth of 1%. Over a lifetime, that small discrepancy in management fees could be the difference between having comfort in retirement and just trying to make ends meet!
  • ETFs have the benefit of being commission-free from a number of sellers like Charles Schwab, Fidelity, TD Ameritrade and Vanguard. Even iShares has cut costs to be comparable.

So again, ETFs do take a bit of time to understand. But this could be way to build your Roth or investment account, and a way to build long-term money for you and your family.

One thing I worry about with ETFs is that people have been trading these things multiple times in a day because it’s so easy. I don’t understand that approach and I don’t practice it; that’s just not me. I’m a “buy and hold” kind of guy and will hold my ETFs for years. And the beauty of the no commission thing with ETFs makes it possible to buy some small amounts every single month, pay period by pay period.

I want you to learn more, take more control and keep more of your hard-earned money! Be sure to check out my Investment Guide.

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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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