ETF v Mutual Funds; Why They're Less Risky
Because mutual funds are actively managed, and because their profit depends on Assets Under Management (AUM), their performances are often manipulated by the management in a variety of ways, in order to meet their own goals, that are not necessarily in YOUR best interests as an investor. At issuee are performance metrics such as short- and long-term performance above peers, marketing to potential investors to grow AUM based on past performance, and avoiding massive redemptions when the market gets sour. A lot of research is being published that discusses the pros and cons of mutual funds vs. ETFs. Here are a couple of examples of the issues: Quarterly "window dressing" - buying or selling certain assets so that the q/q performance appears to be in line with expectations Unbalanced allocation - Loading up on particular assets to take advantage of dividend payouts or market timing Overhead fees - decreasing present fees for the appearance of efficiency, only to