ETFs, Index Funds, Mutual Funds?? Explain, please!

[youngspiritmom]

Hey mamas :)

So, can someone who is familiar with ETFs, index funds, and mutual funds please define them and explain to me the difference?

Also, explain what the fees are for each, who the fees are paid to, can I buy each of these through an account like Scottrade?

What are the advantages/disads of investing in each kind?

Thanks from this confused mama :)

[youngspiritmom]

Bump....11 views but not replies....looks like the other mommas and I are in the same boat :P

[GirlBoyGirl]

This should help some:

http://tinyurl.com/478zxle

As far as fees, you would need to check the individual website of whoever you go through.

[SunRise]

I have a mutual fund (American Funds) that I will soon stop funding due to the fees AND then I need to research new ways of investing, such as the EFTs.

There used to be two kinds of mutual fund groups; Class A and Class B.

Class A funds charge the fee upfront. It was/is approx. 5%. And there is a yearly maintenance fee (1% (example)).

Class B funds did not have an upfront fee unless you withdrew your money before 6 years. If you leave your fund alone, the fee expires after 6 years. This was a good thing. But Class B also has a yearly maintenance fee (1.8% example), and its usually higher then the class a annual fee.  (all things considered, my class b fund has made 50% where my class a fund, which I started a few years before the class B, is still below the initial investment)

BUT one can no longer invest in the B fund any more (although I am not sure if other investment companies still have the B track, its worth researching.)

As well, the initial investment needed to be 1000.00 but once it was opened, one can add to it at lower increments.

Mutual funds used to be considered a safe and good investment, about 10 years ago, when the return was around 8 - 10%, but now a days, with a 5% initial fee and much lower interest, they are not considered the best way to go.

Thats all I know...good luck.

postscript: When I first opened my mutual fund, 6-7 years ago, I set up a meeting with a "broker" through my bank. It was free and informative and no strings attached ... you may want to do that as well, to learn as much as you can.

pps: I like reading the Motley Fool....here is a link concerning Class A and Class B funds

http://www.fool.com/investing/brokerage/2010/01/04/say-goodbye-to-class-b-mutual-funds.aspx

[Ellien C]

A mutual fund, at it's basic level is a collection of stocks (and sometime other investment vehicles). Instead of you buying a whole bunch of stocks to have a diversified portfolio, you would buy a mutual fund, which would buy (and sell) a whole bunch of stocks.

Some funds are "actively managed" with a fund manager buying and selling to try and get a good return out of the fund. You pay fee for this - fees vary. In theory, you should get a better return on an actively managed fund.

Other funds don't have an active manager buying and selling, they're "index funds" and just maintain a certain balance of certain investments. Fees for these kinds of funds are generally less than a managed fund and in theory the return is less.

You can buy either kind of fund through an account like Scott trade.

Personally, I like Index funds for their low fees and decent returns. The whole mutual fund industry lost my trust a few years ago and I've just stuck with Index Funds.

dunno anything about ETFs....