With progress comes innovation. Exchange-traded funds (ETFs), barely 20 years old, are among the more recent innovation to come off the managed money assembly line. By contrast, the mutual fund dates back to the 1920s, surviving the Great Depression and numerous recessions, including the most recent and, arguably, most severe, of the past several years.
Which Is Better?It depends upon the type of investor. The traditional, less sophisticated IRA investor who reallocates strategically, rather than tactically, keeps expenses low and is not a stock picker, may find the process of purchasing shares from a mutual fund company and redeeming them a simpler process. Additionally, plan sponsors' use of mutual funds is well entrenched. Indeed, the ICI reports in its 2011 Investment Company Fact Book that close to $5 trillion is invested in open-end mutual funds within IRAs and defined contribution plans.
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