The Power of ETF’s

When you say ETF most people have no idea what you are talking about. Yet ETF’s are the best and simplest investment. George Caners CA, MBA, CFP, says in his book So you want more money…here’s what works, "ETF’s are tops for growth, liquidity, safety, simplicity and keeping taxes to a minimum. They should constitute almost 100% of your investment portfolio, regardless of your age, wealth, or financial knowledge." Even Warren Buffet the value-investing guru has said that ETF’s are the best investment for the average investor.
ETF stands for exchange-traded fund, and it is an investment that trades like an equity but its value is based solely on the index that it tracks. In many ways it is like a mutual fund but doesn’t carry the high management expenses and discount value that mutual funds carry. It also tracks the market better than most mutual funds. These two factors alone make them perform better than the vast majority of mutual funds. In fact from the year 2000 until the end of 2004 an investment of $10,000 would have grown into $25,000 if they had been in certain ETF’s and they would have been no riskier than the mutual funds that many investors hold. If your investments haven’t grown by at least 50% over the last 4 years then you should seriously consider investing in ETF’s.
Why have you never heard of ETF’s before? The answer is, quite simply,
because banks and financial advisors don’t make money selling them to you. As sad as this may seem, many banks and financial advisors are not really concerned about your best interest. They are concerned about their income, and for most of them that means selling you their proprietary products or loaded funds on which they make a 7.5% commission. They won’t make any money selling you an ETF so they rarely offer them to their clients.
That’s the best reason to work with a financial planner that charges a fee and doesn’t sell commission products. If they are charging a fee they will be more apt to work in your best interest. That’s why we at the Scrooge Guide only work with our clients on a fee basis and never on commission of products sold. In fact when we are hired to do financial plans we never touch your money – we show you how to do it all.
The biggest "secret" about investing in ETF’s isn’t just plain investing in an ETF, but it is how you invest in sector ETF’s and the rebalance them quarterly. This typically gives returns a few percentage points higher each year and this adds up to a very large amount of extra money over 20 or 30 years.

For more information on ETF’s take a look at these websites:
www.ishares.com
www.iunits.com
www.holdrs.com
www.amex.com
www.spdrindex.com
www.indexfunds.com

Scrooge