Want a "Self-Service" Mutual Fund?

If you're used to a full-service sit-down investing meal of actively managed mutual funds, trying out the drive-through of individual investing might seem daunting.

Don't let it be. Exchange-traded funds (ETFs) are a great starter stock for the white-tablecloth crowd. Like regular company stocks, ETFs can be bought or sold any time the market is open via a brokerage account. And they have ticker symbols -- quite snappy ones, in fact, like Cubes (Nasdaq: QQQQ  ) , Spiders (AMEX: SPY  ) , and Diamonds (AMEX: DIA  ) . They resemble their mutual fund brethren in that they hold dozens, hundreds, or even thousands of companies under one umbrella, unified by a particular investing theme (such as companies that comprise the Dow, biotech companies, even French companies -- well, France's MSCSI Index (AMEX: EWQ  ) , anyways).

But unlike actively managed mutual funds, ETFs tend to be cheap. Annual expenses range between 0.1% and 0.65% and are deducted from dividends. While some mutual funds demand a chunk of money from shareholders to get a seat at the table, ETFs don't require a minimum investment. All you need is a brokerage account and an investment idea.

As with drive-through fare and microwave meals, you sacrifice service for the sake of cost controls. There's no fund manager calling the shots, adding or subtracting to a position to balance the portfolio pie when the market sways to and fro.

But you don't need to abandon your pampered investing ways entirely. Holding baskets of stocks in a particular sector or index, instead of just an individual company, helps spread the risk around -- just like a good mutual fund manager. ETFs let you add a shot of instant diversification to your portfolio without having to leave a hefty tip for the service.

For a second helping on ETFs:

Dayana Yochim is a big fan of indexing but owns none of the ETFs mentioned in this article.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 511159, ~/Articles/ArticleHandler.aspx, 9/19/2014 8:14:29 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,279.74 13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASD 4,579.79 -13.64 -0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/19/2014 4:00 PM
DIA $172.45 Up +0.25 +0.15%
SPDR Dow Jones Ind… CAPS Rating: **
EWQ $27.35 Down -0.19 -0.69%
iShares MSCI Franc… CAPS Rating: *
QQQ $99.98 Down -0.06 -0.06%
PowerShares QQQ Tr… CAPS Rating: ***
SPY $200.70 Down -0.18 -0.09%
S&P Depository Rec… CAPS Rating: No stars

Advertisement