Tuesday, June 12, 2007

What's the buzz on EFTs?

Inspired by "Before You Drive that Hot EFT" a week ago in the Wall Street Journal, I'm preparing a summary of exchange traded funds for our Wealth Management newsletter. Although the Journal made EFTs sound powerful and dangerous for amateur investors, this June 2007 AAII piece ($) concludes that in an apples-to-apples comparison, the differences between traditional index funds and EFTs are negligible. If that is true, the recent popularity of EFTs may be attributed to successful broker sales pressure rather than inherent investment advantages.

What do you think?

2 comments:

Anonymous said...

Is it EFT's as in Electronic Funds Transfers? Or ETF's as in exchange traded funds?????

This is supposed to be a professionals information source. I expect that kind of mistake from a novice client, not a 'trust-worthy' blog... Good grief.

JLM said...

And I didn't even notice the typos. That's probably because, as I mentioned to Jim Gust, ETFs have become primarily trading vehicles. Index funds remain primarily investment vehicles.

If ETFs are really trading vehicles, that's what we should call them, as Mr. Gust so cleverly anticipated: Exchange Funds for Trading.

Or EFTs for short.