mutual-funds-etf

In the overall retirement planning process, Mutual Funds and Exchange Traded Funds (ETFs) can play a significant role in the income you’re set to receive. It is important to learn about the different types of mutual funds as it relates to their loads and fees. Mutual funds are separated out by share classes. Class A shares have up-front sales loads or commissions that are taken from initial investments.  These commissions are sometimes over 5%.  B-shares on the other hand, are characterized by a back-end load that causes some individuals to hold off on selling the fund to avoid paying the fee. C-shares have no loads, but it must be cautioned that they have the highest internal fee of any share class.  There are also I or Y shares (institutional class or investor class shares) that you have to qualify for.

For some, finding tax efficient ETFs can be an appropriate alternative to mutual funds. While both are viable options to investors, ETFs and mutual funds differ in ways that investors must consider when deciding in which to invest.  An Exchange Traded Fund is one of the fastest growing investment tools and comes with no sales commissions.  ETFs often have lower internal fees than mutual funds.   ETFs can be more tax efficient than mutual funds. For example, the sale of securities within the mutual fund portfolio creates capital gains for the shareholders, even for shareholders who may have an unrealized loss on the overall mutual fund investment whereas an investor in a ETF usually is not exposed to capital gains on any individual security in the underlying structure.  Further, ETFs have no short-term redemption fees and can be traded at any time during the day. ETFs however come with downside risks such as trading fees and market fluctuations that must be taken into consideration in your purchasing decision.

In any case, your personal goals for retirement and unique financial situation is the best place to start before determining the types of investments to make. Click HERE to learn more about the different retirement solutions for you and be sure to request your complimentary financial review.