Mutual Funds and EFT’s both excellent investment platforms and the Walton Financial Group is ready to help you choose which approach suits your financial goals
The Walton Financial Group in Barrie Ontario has advice for mutual fund and EFT investors
In recent years, you may have heard about exchange-traded funds (ETFs) as an alternative to investing in mutual funds.Both are pools of investments managed by professional fund managers. They allow you to invest in a wide variety of stocks and bonds so you can diversify your investments instantly.
Mutual funds and ETFs can be used as part of a buy-and-hold investment strategy (investing over a longer term), while ETFs can also be used for almost any investment strategy, including day trading. ETFs trade in real time (like stocks do), while mutual funds can only be bought and sold at the end of the day and switching investments takes two days in addition to the day a fund is bought or sold.
With both mutual funds and ETFs, you can invest in a registered retirement savings plan (RRSP), registered retirement income fund (RRIF), tax-free savings account (TFSA) or registered education savings plan (RESP). Both can also be held in non-registered accounts.
Depending on the type of fund you buy, you may receive distributions of dividends, interest, capital gains or other income the fund earns on its investments. With a mutual fund, you may choose to receive distributions in cash or have them reinvested in the fund for you. Unless you request the distributions to be paid in cash, the mutual fund will most often reinvest the distributions for you.
Unlike many mutual funds, ETFs don’t reinvest your cash distributions in more units or shares. Instead, the cash is held in your account until you specify how you want it invested.
INVESTING IN EFT’s
If you enjoy the responsibility of managing your investments, then ETFs may be more your style.
Like stocks, ETFs trade all day, meaning the price of an ETF can change minute by minute. Mutual funds are instead priced once daily, at the end of a trading day. This gives you no option other than to purchase at the closing price which is known as the net asset value.
The day trading flexibility of ETFs is ideal for some investors because they can trade anytime the market is open. If you wish to be actively involved in your trades and have control over buying and selling, maybe you’re cut out to invest in ETFs.
INVESTING IN MUTUAL FUNDS
On the other hand, if you’re the kind of investor who desires less control and wants a simpler, more hands-off experience, combined with the guidance of a professional investment representative, maybe it’s mutual funds you’re after.
They suit people wanting their portfolio to be professionally managed. You can also easily set up automatic investments in fixed amounts towards your mutual funds – so you don’t have to remember to contribute each month.
As well, mutual funds offer additional series and structures that aren’t available in ETFs. These can provide you with regular cashflow, or invest your money more tax efficiently.
STILL HAVE MORE QUESTIONS?
It could be a combination of the two that’s right for your unique situation. An investment representative at the Walton Financial Group in Barrie Ontario can help assess your goals, financial situation and risk tolerance and create an investment plan that helps you make the right choices.
