Today with so much focus on exchange traded funds (ETFs), some wonder why we, or any investor, would continue to use noload mutual funds.
Our answer is the same as it was 50 years ago: because markets change, and funds—whether they are structured as mutual funds or ETFs—make it easy to respond to market changes.
Five reasons we love funds:
1. Access to top money managers
Funds allow us to have our money managed by some of best institutional managers and research teams in the world. Many of these managers normally require very high investment minimums, but funds give us access to these managers for a very reasonable minimum investment (often less than $2,500).
2. Efficient & diversified
With funds, we can effectively buy or sell a diversified basket of securities that's focused on almost any market sector, geographic region or company size. We have access to almost any proven investment strategy, too, and most of us can own more stocks through a fund than we would on our own.
3. Highly regulated
Mutual funds are highly regulated and transparent. There are tight restrictions on risks, disclosure requirements, and many built-in protections for investors. Fees are clearly disclosed and performance is independently audited. And because returns are net of expenses, we can make true apples-to-apples comparisons between funds.
4. Reasonable costs
When you consider the cost of trading a diversified portfolio, the quality of the fund’s research teams and professional management, and the convenience of hiring or firing a manager in one transaction, you're apt to find that fund costs are quite reasonable.
5. Easy to trade
Open-end mutual funds are priced once a day at their net asset value (NAV), so all investors who buy on the same day get the same price. Most brokers now make a large number of funds available without transaction fees (NTF) so investors can often buy and sell funds without any additional broker costs.
Whether you use noload funds or ETFs or a combination of both, we believe the most important thing is to invest in the top performers and change your portfolio as markets change.