[tw]

Originally Posted by aimeecc

I am definitely not an economic or financial expert. I save each month, invest into mutual funds each month. My usual is to not think about it.

ETFs were created just for you. Either invest in an entire industry (ie financial, semiconductors, retail), or invest in the S&P500, Dow Jones, FT1000, etc. Invest without an up to 2% charge for the industry professional who historically underperforms the market. You paid someone to run that mutual fund and what happened?

Index funds are mutual funds that remove the expensive professional and therefore outperform other types of mutual funds.

ETFs are how to invest just like an index fund usually with even higher returns. If you make 8% but pay the professional 2%, then what have you done? If you lose 4%, you still pay that up to 2% to that professional. Reality was stated bluntly by The Economist on 1 Mar 2008 entitled "Money for old hope: A special report on asset management" and quoted in Post 20

If you don't have complex tax problems. If you don't have a $million to invest. Investments that require little attention without those massive service fees. As The Economist said, "The fund-management industry has done very well - but mainly for itself" and "But whereas the clients have not always done particularly well out of the industry, the providers have prospered." Could they be any more blunt?

This is an excellent time to make decisions for your future. You would pay service fees to a professional who typically underperforms the market? Welcome to mutual funds that, "persuade their clients to select their funds on the basis of past performance, even though there is little evidence to show that this is a good predictor of future success."

Those who don't watch their investments are best advised to invest in indexed mutual funds without the expensive professional - without those expensive fees. Or buy a stock (called an ETF) that does same without the major expense of an industry professional - designed for investors such as aimeecc. ETFs have many names such as Spyders and Powershares. As the Economist noted, ETFs are the Wal-marts of investing. They were created for people who want higher returns and do not watch the market.

Industry professional don't like these ETFs because those service fees instead appear as profits for the investor.

The Economist was quite blunt about it:

Hence the clients get engaged in a costly game of chasing the best performers, even though by definition they are bound, on average, to lose it: after costs, the average manager inevitably underperforms the market.

If you are not managing your investments, then ‘Wal-mart’ your investment in index funds. Even better than indexed mutual funds are stocks called ETFs. Eliminate the biggest expense that also historically underperforms the market - the expensive fund manager.