Index Funds? ETFs? Mutual Funds?

Picking index funds isn’t always the best strategy. If you like picking index funds, you’re simply subscribing to the thought that average is good enough, when the harsh reality is that with a little bit of application of investment principles, you can find funds, for example, ETFs, that can do better than the average index.

Now, this may take a little bit of extra work but the rewards are obvious. When the only principle that you’re applying to your investment strategy is expenses, you oftentimes will overlook many other strategies that just make lots of sense. Using other investment principles like asset turnover or manager tenure will help you select a mutual fund or an ETF which can give you an edge over the average index fund. Applying those principles can oftentimes be somewhat staggering; however, just a couple of them can marginally improve your rate of return.

Having a full menu of mutual fund selections at your disposal is very important as well. Many times in an investment account, the restrictions that are placed upon the individual will reduce the possibility of return because of limited mutual funds or ETFs. When you spend a little bit of extra time researching the possibilities that exist for investment choices out in the marketplace, you’ll realize that 26,000 mutual funds exist. Compare that to the platform that you’re currently using!

Now, I understand that many times there are restrictions that we can’t control – like in a 401(k) plan. It’s still important to apply more than just one principle like rate of return to picking your investment strategy. This is why when selecting a good financial advisor, it’s important for them to understand the investment principles that they subscribe to. It’s important for the individual to understand how the application of these principles will apply to their portfolios, and what advantages they should expect to experience as a result of these principles. Like many things in life, applying a discipline is often difficult. I like to eat a lot more donuts than I should and it requires real discipline not to walk down to Meek’s every day.

Applying an investment principle just comes natural to Blue Jay, and in the case of managing your money it’s really important that the individual understands what principles your advisor is applying to your money. You need to be certain what your future will look like. You need to have confidence in what your future will look like and understanding how your advisor is applying these principles is a foundational aspect to this confidence.

Exchange traded funds (ETFs) and mutual funds are sold only by prospectus. Investing in ETFs and mutual funds is subject to risk and potential loss of principal. ETFs incur trading and commission costs similar to stocks and frequent trading can negate the lower cost structure of an ETF. There is no assurance or certainty that any investment or strategy will be successful in meeting its objectives.

Investors should consider the investment objectives, risks and charges, and expenses of the fund carefully before investing. The prospectus contains this and other important information about the fund. Contact your registered representative or the issuing company to obtain a prospectus, which should be read carefully before investing or sending money.