ETF’ S: T HE
P ROBLEMS WITH
M UTUAL F UNDS
P ROBLEMS WITH M UTUAL F UNDS

Sales Charges and Loads

High Annual Fees

Taxes

Too Many Choices
E XPENSE R ATIOS

Expense Ratio: the percentage the
mutual fund charges to run the fund
on a daily basis.

Some funds charge as high as 1% to
manage the fund.
E XPENSE R ATIO

The American Developing World
Growth and Income Fund
(DWGAX)

$14,216,000,000 in Assets

1.39% Annual Fee

$197,602,400 in Annual Fees
E XPENSE R ATIO
 If you invested
$1,000,000 in DWGAX,
every year you would
pay $13,000 in
management fees.
12B-1 F EE ’ S

In addition to the expense ratio, some firms
charge a 12B-1 fee.

This fee is used to market the mutual fund.

Ranges anywhere from .25%-1%.
F UND C LOSING
Some funds that
close their doors to
new investors, still
charge a 12B-1
marketing fee.
ETF’ S

ETF stands for Exchange –
Traded Funds

Mutual Funds younger…sexier
cousin!
ETF’ S AND M UTUAL F UNDS
Mutual Funds
ETF’s
 Trade at one price
 Are bought and sold
throughout the day.
Must wait until 5
o’clock to see what
the price is.
 Expense ratio is
about 1%
 Actively Managed
at anytime during
regular trading hours
 Expense ratio is .09%
 Typically Run by
Computers to track
indexes.
C OMMISSIONS
Mutual Funds
ETFs
 5.75%
 Same cost as buying a
 If you buy $10,000
of Mutual Funds…
$575
stock.
E*Trade
$10
Scottrade
$7
ShareBuilder $4
Some companies charge
no fees!
A DVANTAGES
OF
ETF’ S

Trades like a stock

Extremely low expense ratios

$1,000,000 invested would only
cost $900 in fees, rather than
$13,000 in mutual funds.

Instant Diversification

Tax Efficiency
I NDEX ETF’ S

Index Funds track the progress of
major benchmarks

S&P 500
(SPY)
Spider

Nasdaq 100
(QQQQ)
Cube

Dow Jones
(DIA)
Diamond
M ARKET C AP ETF’ S

Buys either:

Small

Mid,

Large,

Multi-cap
B OND ETF’ S

Buys

Corporate

Municipal

Government Bonds
ETF’ S

Vanguard Total Stock Market Portfolio
(VTI)

Buys every stock that exists on every
market
S ECTOR ETF’ S

Tracks the progress in a particular sector.

Buys all the stocks in the same industry.

Cell Phone Carriers

Oil

Banking

Green Energy
R EGIONAL ETF’ S

Buys stocks in one region

China

Japan

Europe

Developing Countries (BRIC)
ETF’ S
 ETF’s can be any
combination of the above
mentioned
 Small Cap Europe
 Chinese Banking
 Mid Cap Bond Funds
C ONCLUSION
 Instant diversification
 Extremely low costs
 Tax Efficiency
 Trades like a stock
 Better alternative to mutual
funds