Why I’m Thankful for ETFs
Happy Thanksgiving week! I must admit that this is one of my favorite weeks of the year, and that’s not just because we get an extra day off from the hustle and bustle of the financial markets.
What I really love about Thanksgiving is that it provides us with a reminder to stop and reflect on what we’re all truly thankful for. In my case, I am thankful for all of my tremendous family and friends who help fill my life with happiness and purpose. I’m also thankful that I was born and raised in a country that provides the freedom for me to choose my own destiny.
Professionally, I am thankful for one of the biggest, most positive developments in years, and that is the proliferation and increasing adoption of exchange-traded funds (ETFs).
Why am I so thankful for ETFs? Here’s a short list of my favorite reasons why we all should be thankful for these fantastic investment vehicles.
- Simple to understand. ETFs are usually pegged to an index, and that means there’s no mystery about what kind of trading scheme or investment thesis you’re buying into.
- Easy to use. ETFs can be bought and sold via any brokerage account, usually with a just a few clicks of your mouse or a quick phone call.
- Cost effective. ETFs are dirt cheap when compared with the cost of similar mutual funds. On average, ETFs will cost you about 75% less to own than a comparable mutual fund.
- Transparent. You always know what you own with ETFs, and at all times. Unlike mutual funds that only have to report holdings once per quarter, ETFs must report holdings on a daily basis.
- Variety of choice. At last count, there are 1,644 ETFs to choose from, with total assets now topping the $2 trillion mark. Equities, bonds, commodities, international and emerging markets — if it’s publicly traded, there’s an ETF for it.
- Highly liquid. ETFs are ultra liquid, meaning you can sell them at any time of the trading day and get your money out and into cash. You can’t do that with mutual funds, and you can’t do that with many hard assets such as precious metals or real estate.
- Tax efficient. ETFs are structured like an index fund. As such, there is an extremely low turnover rate in the holdings when compared to mutual funds. The low turnover means far fewer “taxable events” such as those that occur regularly with an actively managed mutual fund.
There are many more reasons why I am thankful for ETFs, but I think these seven give you a great sense of why we all should be grateful for the proliferation of what are tremendously productive investment vehicles.
For more on which ETFs you should own right now, I invite you to check out my Successful ETF Investing advisory service. Right now, subscribers are profiting from several major trends using targeted ETFs. To find out how you can get a leg up on the markets, I invite you to check out Successful ETF Investing today.
Snow on Thanksgiving
“If you think Independence Day is America’s defining holiday, think again. Thanksgiving deserves that title, hands-down.”
The late, great journalist Tony Snow knew the importance of Thanksgiving in America’s history. This year, take a few minutes to read about the real meaning of Thanksgiving, which actually has a lot to do with the triumph of capitalism over collectivism.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.
In case you missed it, I encourage you to read my e-letter column from last week about the best target for international investing dollars. I also invite you to comment in the space provided below.