
What Are Exchange-Traded Funds (ETFs)? They are essentially a hybrid between individual stocks and mutual funds with characteristics of both. After some research on Yahoo! Finance and About.com, here are some highlights of Exchange-Traded Funds:
Moreover, ETFs are more tax-efficient than mutual funds. You can see the chart below — the big drop in HFCGX value is the huge distribution at the end of 2006. Luckily, this fund was in my IRA, so no tax!

In the post How Expense Ratio Affect Long-Term Performance?, I showed you how investing in mutual funds with high expense ratio can cost you 50% of your potential gain. With this in mind, I went back to review my IRA portfolio and found a fund that charges 1.23% (above my 1.0% maximum tolerance). This does not seem expensive, but it can cost me 30% of money invested if I keep it in the fund for 30 years. Also, as I mentioned earlier, ETFs tend to be more tax efficient than equivalent mutual funds making them more appealing in a taxable account.
Right now, I have enough money invested such that it is more expensive to invest in mutual funds than ETFs. So today, I went ahead and sold HFCGX and traded it for VB.

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I love VB and own that instead of a mutual fund. I also have VTI and Vanguard’s Health care ETF, VHT. I love ETFs.
Lazy – hi again! I am just getting into ETFs. I sold some of my high expense mutual funds and now own some shares of VB, VBR, and VGT. I just love Vangard super low expense ratio, and great high yield / low PE combination.
That’s a great post Pinyo. I am thinking of “owning the world” through 2 etf’s – VTI and VEU. I haven’t gone as far as %-age exposure to bonds yet
The graph really shows a lot. Thank you!