Free ETF Trading Report: Discover how to trade the top 5 ETFs for big profits in 2017! This free report reveals detailed strategies and top trades that you could make today for quick gains of 46% to 115%.
If you’re like majority of investors, you’re probably making one huge investment mistake.
It’s likely causing higher investment expenses and lower real returns, and it limits your ability to act quickly in a crisis.
This one mistake could be the difference between retiring “on time” and with plenty of savings . . . and working a part-time job at Wal-Mart to make ends meet.
So, what is this huge mistake?
I’ll get right to the point. The fact is that 43% of Americans have their investments ̶ including retirement accounts ̶ invested in mutual funds.
That’s unfortunate, because a large number of independent studies show that mutual funds have been horrible investments.
In fact, research finds that 80% of mutual funds consistently fail to beat their self-selected benchmark index! That’s astounding.
In addition, mutual funds charge expenses, transaction fees and sales loads that hinder your results ̶ not to mention management and other hidden fees in 401k accounts.
So what’s the solution?
Start using exchange-traded funds (ETFs) instead of mutual funds. The benefits are myriad. For a retirement account, you can simply roll over your 401k, 403B, etc. (or a portion of it) into a self-directed IRA brokerage account.
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Why do I say this?
With a self-directed brokerage account, you can make your own portfolio of a wide variety of sectors and commodities using ETFs, including tracking the broad U.S. stock market.
The diverse selection of global investments, including commodities, available through ETFs simply cannot be matched by mutual funds.
And don’t forget, ETFs have the same low transaction costs as purchasing a stock.
There are three primary reasons that ETFs are much better than mutual funds:
No. 1: Flexibility of ETFs
Mutual funds allow you to buy or sell ONLY once a day, at a price that comes out after the market closes. This is particularly bad for active investors and traders.
For example, if the market is down 2% and you want to sell a mutual fund position, you can’t do so until the market closes. It could be 10% down by then!
With an ETF, they trade in your regular brokerage account (or IRA retirement brokerage account) like a normal stock. You can trade them ANY time during market hours for a simple low stock commission.
Additionally, you can trade options on many ETFs, and place bearish bets through Inverse ETFs. Options trading on ETFs is even available in IRA brokerage accounts!
Managing a portfolio to target market-beating returns and diversification is just simply a world easier with ETFs in a brokerage account than with mutual funds.
Instead of having a fund manager calling the shots, YOU control the basket of investments and timing.
No. 2: Diversity of ETFs
ETFs cover the entire world of investing, with an ease of use and diversity not available anywhere else.
For example, in your normal or retirement brokerage account, you can trade ETFs that cover every U.S. stock sector, every commodity, every international stock market, even bonds and volatility.
If you want a core passive holding, the SPDR S&P 500 ETF (NYSE: SPY) covers the broad market.
Then in the same account if you want a position in gold, you can trade SPDR Gold Shares (NYSE: GLD). No separate futures account is needed.
If you then decide you want to invest in Asia for example, it’s simple to place an order to buy into China through iShares China Large-Cap ETF (NYSE: FXI) or Japan through iShares MSCI Japan ETF (NYSE: EWJ).
Basically, your mutual fund and commodity futures account can BOTH be replaced by ETFs in a brokerage account, all in one place.
No. 3: Fees and ETFs
Mutual funds have management fees, loads, expenses and transaction fees — in addition to yearly taxable capital gains and other distributions. These surpass the fees that ETFs charge in most all cases.
The average mutual fund charges 1.25% in annual expenses. Meanwhile, ETFs on average charge just 0.44%.
On top of that, your 401k then has administrative and other expenses deducted. The fees on these types of retirement accounts are sometimes hidden or buried, and are higher than those of brokerage accounts.
An extra 0.5% in investment fees may seem small. But consider this . . .
You open an account today with $100,000 and invest in low-cost ETFs. You generate 7% annualized returns (after fees). In 30 years, your $100,000 grows to $761,226.
Compare that with an account that’s invested in mutual funds, with higher expenses. Let’s assume those higher costs reduce the annualized returns by 0.5%. Instead of earning 7% returns, you earn 6.5%.
At the end of 30 years, your account is valued at $661,437. The extra one-half point in fees ends up costing you nearly $100,000!
Moving your 401k (or a portion of it) into a self-directed brokerage retirement account can save you quite a bit over the long run, and boost your investment results.
For the active investor, the choice is clear: dump your mutual funds for the flexibility of ETFs. There is a huge benefit to having a self-directed brokerage account for your investment portfolio (or a portion of it).
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