AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.
Expert: Warren Boroson Date: 10/7/2007 Subject: ETF and Mutual Funds
Question Hello!
I am 32 and have began to invest for retirement.
I have a couple questions if you don’t mind:
1) I plan to start an 403B and an IRA. I have some investments in mind (eg: Int value funds, U.S. Value funds, S&P 500 index funds etc).
Now my question is to fit these investments I have in mind, should I choose Mutual funds or ETF’s?
2) I noticed that when I go to buy a mutual fund through a broker, I am charged a transaction fee (say $20). I heard that if I buy that same mutual funds directly through the company that offers it I pay no transaction fee. For example, if I want to buy a Vanguard Large Cap Mutual Funds from Scottrade I would pay say $20 in fees. But If I bought that fund directly from Vanguard there would no fee.
So if this is the case, then why do people buy mutual funds through a broker vs directly from the company.
Thank you
Asad Raza
Asad_raza5367@hotmail.com
Answer Dear Asad:
1. All ETFs are index funds, remember. I prefer mutual funds in general because you aren't charged when you reinvest in them. And while the expenses on ETFs are usually low, the expenses on mutual funds like Vanguard's aren't much more than those on ETFs
2. With Fidelity, if you buy certain non-Fidelity funds you're charged $75. But if you buy them on your own, and then move them over to Fidelity, there's no charge.
Some people will buy a fund through, say, Scottrade, and pay $20 just for the convenience. Or because they don't know better.
Asad, check out Morningstar's recommendations before buying any funds.
