When it comes to choosing investment options, many individuals are confused about where to begin. Many a financial advisor would recommend starting out with safer, more conservative methods of investing before attempting to dabble in higher-risk options. For many in Idaho and elsewhere, these early forays into stock market investing come down to two main options: exchange-traded funds (ETF) and mutual funds.
Mutual Funds
A mutual fund, which is sometimes referred to as a portfolio, utilizes a strategy of investing in diverse stocks and bonds so as to yield consistent, reliable and low-risk growth. These funds are also managed by professional investors, who can incorporate other strategies to help improve the fund’s growth. Many a financial advisor would recommend that first-time investors in Idaho and across the nation use mutual funds as a safe, steady-growth investment.
However, the professional management that comes in creating a mutual fund also results in fees that must be paid by the investor—which lessens one’s ability to increase his or her wealth. Taxes can also diminish gains.
The ETF
Investopedia explains that an ETF is “a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.” ETFs can prove quite advantageous to investors because they offer the diversified investments of an index fund, but are traded the same way as a common stock, allowing investors to buy and sell quickly. Investors also don’t have to deal with many of the fees associated with mutual funds.
A financial advisor would be quick to note, however, that ETFs are much more passive than mutual funds. ETFs tend to passively follow the trends of an index rather than actively incorporate planned-out strategies to further increase growth. Potential investors in Idaho and elsewhere would do well to examine their own financial situation and determine which option works best for them.
Kevin Johnson is a finance writer reporter for Fusion 360, an SEO and content marketing agency. Information provided by Sanctuary Wealth Management. Follow on Twitter
Mutual Funds
A mutual fund, which is sometimes referred to as a portfolio, utilizes a strategy of investing in diverse stocks and bonds so as to yield consistent, reliable and low-risk growth. These funds are also managed by professional investors, who can incorporate other strategies to help improve the fund’s growth. Many a financial advisor would recommend that first-time investors in Idaho and across the nation use mutual funds as a safe, steady-growth investment.
However, the professional management that comes in creating a mutual fund also results in fees that must be paid by the investor—which lessens one’s ability to increase his or her wealth. Taxes can also diminish gains.
The ETF
Investopedia explains that an ETF is “a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.” ETFs can prove quite advantageous to investors because they offer the diversified investments of an index fund, but are traded the same way as a common stock, allowing investors to buy and sell quickly. Investors also don’t have to deal with many of the fees associated with mutual funds.
A financial advisor would be quick to note, however, that ETFs are much more passive than mutual funds. ETFs tend to passively follow the trends of an index rather than actively incorporate planned-out strategies to further increase growth. Potential investors in Idaho and elsewhere would do well to examine their own financial situation and determine which option works best for them.
Kevin Johnson is a finance writer reporter for Fusion 360, an SEO and content marketing agency. Information provided by Sanctuary Wealth Management. Follow on Twitter