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Newspaper Effects

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Shariq Rasul

Experts weigh in on strengths and weaknesses of mutual funds and ETFs
Peter Henderson, The Canadian Press

In this article Jeanette Brox a financial advisor from Toronto discusses the strengths and weaknesses of both mutual funds and exchange traded funds (ETFs). The mutual funds normally offered by most financial institutions have come under competition from low-cost ETFs which have emerged as an alternative. Both mutual funds and ETFs minimize risk of investments of bundling financial products including stocks, bonds and fixed-income securities together. ETFs unlike mutual funds are not managed by financial professionals which reduces overhead and therefore fees. Jeanette Brox recommends mutual funds and says the management fees are worth it for investors who want professional help.

The investment market in Canada is still mostly dominated by mutual funds. The mutual fund companies have totalled $1.2 trillion worth of assets at the end of June which in comparison to $84.7 billion worth of exchange traded funds. Most Canadians want the simplicity of mutual funds as part of a plan with a professional. Jeff Kaminker, president of Frontwater Capital said that the popularity of mutual funds is the reflection of investing strategies of conservative Canadians. Many people from the finance industry are in favour with mutual funds such as Sandeep Gosal, ash associate consultant at research firm Investor Economics. He stated that mutual funds can have some fees for buying in and out, ETFs can also bring extra costs. EtFs are traded on exchanges so investors often need to pay the trading fees. Some ETFs are adding commissions which are also known as trailer fees, up to 0.75 per cent. At the end “its not a matter of one being better for the other. It’s a matter of what’s best for the individual.”

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