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ETFs are similar to mutual funds but often have lower management fees, making them more affordable. They invest in stocks, bonds or other assets and can provide significant returns, even for ...
The largest ETFs, which passively track stock market indices, have annual expense ratios as low as 0.03% of the amount invested, although specialty ETFs can have annual fees of 1% or more of the amount invested. These fees are paid to the ETF issuer out of dividends received from the underlying holdings or from the sale of assets. [7]
One notable component of the expense ratio of U.S. funds is the "12b-1 fee", which represents expenses used for advertising and promotion of the fund. 12b-1 fees are paid by the fund out of mutual fund assets and are generally limited to a maximum of 1.00% per year (.75% distribution and .25% shareholder servicing) under FINRA Rules. [7]
Some kinds of funds (e.g., cash funds) cost a lot less to run than others (e.g., diversified equity funds), but a good fund should do better – after fees – than any cash fund over the longer term. In general it seems that there is, at best, a positive correlation between the fees charged by a fund and the returns it provides to investors. [3]
Investors that purchase an ETF will pay a fee for holding the fund, but can get exposure to hundreds of investments. Unlike mutual funds, ETFs can be actively traded during market hours and are ...
^SPX data by YCharts. An essential component of retirement planning. Building multiple streams of passive income is a prudent approach to retirement security. These ETFs offer different methods ...
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