Mutual, Index and Exchange Traded Funds comparison

Stocks are pieces of ownership of a company or capital raised by a company by issuing shares. Think of it as a company that has been sliced into small pieces called shares, and these shares are available to the public buy. 
To fully understand the concept of stock investment, some investors acquire knowledge by reading eBooks like "Intelligent Investing" and taking online courses like "Advanced Investment Courses (DVD) by Professor Steve L. Stezak"
Alternatively, people can understand the principles of stock investment by reading books such as "The Intelligent Investor" and "The little book of common sense investing "         

      Mutual Fund are simply a bucket or pole of stocks and bonds, it is called a diversified portfolio because it consists of different types of securities, stocks, bonds, etc. People normally prefer a diversified portfolio because it involves less risk, when a particular stock is going down it can be supplemented by another stock going up in value. Mutual fund charge annual fees called expense ratio and in some cases commissions which can affect the overall returns

Mutual funds can be selected or evaluated in different ways, It is very important to know about a mutual fund before even going to the financial institution, understanding the fund will avoid the situation of getting to an unknown portfolio. It will also pass a message to the financial manager that you fully comprehend and can assist in the fund selection

Most financial institution, be it a traditional bank or a stockbroker do have a mutual fund selector, screener or a simulator in their website, these selectors will require some basic information like risk tolerance, domestic or international funds, securities types to enable you to choose from a list of mutual funds.

Third-party websites like morning star also provide mutual fund screener in case a second opinion is required; morning star will suggest mutual funds based on the information provided. Financial institutions normally sometimes labeled the mutual fund using their trademark symbols, which means a similar mutual fund with a traditional bank will not necessarily have the same symbol as a broker.

Once a mutual fund is selected by an investor, the financial institution provides the investor with the prospectus, which is a formal document that summarizes the details of that particular mutual fund.
Mutual fund prospectus contains the following:                                          
 - The mutual fund fees.
 - Minimum investment amount.
 - The performance history of the mutual fund.
 - The risk tolerance of the mutual fund.
 - The content of the mutual fund.

It is mandated by the securities and exchange commission (SEC) that the financial institution provide the prospectus to any investor before purchasing a particular mutual fund
Mutual funds are for investors who aren’t knowledgeable about the stock market but still want to benefit from the investment venture as opposed to index and exchange-traded funds, they are completely managed by financial portfolio managers who get paid high fees even if the mutual fund underperforms.

The fees structure of the mutual fund is broken down into three sections;
 - Management/Advisory fees.
 - Load/Transaction fees.
 - Administrative fees.

The average of all the fees lumped up together now represents the expense ratio of the mutual fund.

Even though mutual funds come with high fees because they are completely managed by portfolio managers there are still some advantages of a mutual fund as compared to buying individual stocks

Here are some advantages of mutual fund:
 - Diversification, less risky.
 - An easy method of investing.
 - High liquidity, easy to trade/sell
 - Wide variety to choose from.

On the other hands, here are the disadvantages of mutual fund:
 - High fees, expensive.
 - Investors have no control.
 - Price and traded just once a day.
 - High minimum amount to start.

Index Fund on the other hands is a type 
of financial portfolio constructed to track or match the components of a market index, such as the Standard & Poor's 500 Index.  Index funds is said to provide broad market exposure with low operating expenses since it simple mirror a market index.
Index funds can also be considered a type of Mutual funds with some difference.
 - Index funds are not actively managed, that is why the fees are less
 - Index funds track the performance of an existing market index, with less risk
 - Investors use indexes as a basis for passive index investing
 - Indexes are used as a benchmark to monitor the movement and performance

These market indexes have been created or chosen by the top business analyst, financial advisers, investors in a specific stock exchange which explains why other investors simply track their performance.

Index fund was first introduced over 40 years ago by the founder of Vanguard one of the world’s largest stockbroker, John Bogle aims at lowering the management fees to put money back into the pocket of investors

Index funds are also bucket or pole of stocks and bonds, it is called a diversified portfolio because it consists of different types of securities, stocks, bonds, etc, but instead of portfolio manager it tracks an existing market index

A market index is just a hypothetical portfolio, which measures a section or some companies within a particular stock exchange, it is a tool used by investors and financial analysts to gauge the market movement.

Here are some of the world’s popular market indexes.

S&P 500 is a US stock market index that tracks the performance of the 500 large companies listed on the stock exchange, it is considered one of the most commonly followed equity indices and the best representation of the U.S stock market

Russell 2000 index, is also a U.S market index, which tracks the performance of 2000 small caped American companies in the Russell 3000 

Dow Jones Industrial Average also know as Dow, is a market index that measures the performance of 30 large companies listed on the U.S stock exchange

Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market.

FTSE 100, The financial time stock exchange 100, tracks the performance of 100 largest companies in the London stock exchange

NIKKEI 225 commonly called Nikkei tracks the performance of 225 largest publicly owned companies in Japan, Tokyo stock exchange

NIFTY 50, National stock exchange of India, this market index represent the best 50 India companies

CAC 40, is a France stock market index, the represents the 40 most significant stocks among the 100 largest market caps in France

NGSEINDX: IND, Nigeria stock exchange main-board index

     Exchange Traded Fund is a financial portfolio of securities, such as stocks, bonds that tracks an underlying index and traded on the stock market. ETFs offer low expense ratios and fewer broker commissions than buying individual stocks.

Another definition can simply be funds that are traded in the stock exchange, they are diversified portfolio like mutual and index funds.

An exchange-traded fund can also track commodities like gold, silver or even particular industries, in this case, it is referred to as sector exchange-traded funds, while there are also index exchange-traded funds are mentioned above.

Exchange-traded funds, ETF to be precise lets investors buy a large basket of individual stocks or bonds in one purchase.

One could say that an EFT is a relative of a mutual fund, which is another way to purchase many stocks at one time. However, there are few major differences between mutual funds and ETFs, mutual funds tend to have a human fund manager who actively trades stocks in and out based on which ones they predict will go up or down, whereas the vast majority of ETFs are unmanaged by humans.

The two main types of Exchange Traded Funds ETFs are sector tracking and stock market index tracking

Here are some Sector Tracking ETFs
 - Real Estate
 - Financials
 - Energy
 - Industrial
 - Information Technology
 - Materials and Minerals

Here are some of the Stock Market Index tracking ETFs
 - S&P 500
 - Russell 2000
 - FTSE 100
 - CAC 40

Before the early 1970s, when investors wanted to invest in the stock market, they will have to visit a stockbroker and buy shares in an individual company. Upon its founding in 1976, Vanguard forever changed the market when it launched its first index fund, called the Vanguard 500 Index (VFINX).

An index ETFs fund buys all, or a representative sample, of the securities in a specific index like the Standard & Poor’s 500 indexes instead of hiring pricey fund managers to select which stocks or bonds the fund will hold.

Today, there are numerous ETFs to buy from multiple brokers. When you’re ready to invest, open a low or commission-free brokerage account, select the fund and number of shares you want and click “buy.” Review the funds so you can better decide which to choose.

Things to consider when buying an ETFs:       
     - The price per share and performance history
 - The management expense ratio.
 - Top 10 holdings of the fund.
 - Does it pay a dividend or not.

Here are some to ETFs and their ticker symbols


VTI  - Vanguard Total Stock Market Index Fund ETF Shares
VDY - FTSE Canadian High Dividend Yield Index ETF
VOO - Vanguard S&P 500 ETF
VUN - Vanguard U.S. Total Market Index ETF 
VEE - Vanguard FTSE Emerging Markets All Cap Index ETF
SPY - SPDR S&P 500 ETF Trust
VIG - Vanguard Dividend Appreciation ETF

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