GMB Ep #91: Why Mutual Fund Managers Are Converting to ETFs

 

One of the trends we’ve been recently observing is the tendency of mutual fund managers to convert their fund structure to Exchange-Traded Funds. Throughout this episode, Grant reviews the structures of mutual funds and ETFs, what makes them different from each other, the reasons why it makes sense for mutual fund managers to switch to ETFs, and what investors should keep in mind about mutual funds being converted to ETFs.

 

 

Show Notes

[01:43] Mutual Funds – Grant reviews how mutual funds are structured and how the mutual fund managers use funds from a group of investors to generate greater returns than what individual investors have the capacity to generate on their own.

[08:42] Limitations – Limitation of mutual funds and how these limitations may create unfavorable situations for mutual fund managers in some scenarios.

[13:50] Understanding ETFs – What led to the creation of Exchange-traded Funds, how they work, and the difference between mutual funds and ETFs.

[21:51] Benefits – Grant dives into the attractive characteristics and tax benefits of exchange-traded funds.

[25:00] Popularity of ETFs – Grant shares his thoughts on how ETFs became popular in the last decade and the trend of some mutual funds being converted to ETFs.

[30:00] Why Investors Should Care – How this trend of mutual fund managers converting their structure to ETFs affects the investors in terms of expenses, taxation, benefits, and what to do if their mutual funds are being converted.

 

Resources

Investor Bulletin: Mutual Fund Conversion to Exchange-Traded Fund (ETF):
investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/mutual-fund-conversion-exchange-traded-fund

Making the Switch: Turning a Mutual Fund into an Exchange-Traded Fund:
bbh.com/us/en/insights/investor-services-insights/making-the-switch-turning-a-mutual-fund-into-an-exchangetraded.html

GMB Ep #84: This is How I Evaluate Mutual Funds & ETFs

Evaluating investment funds or any other type of investment is crucial for a savvy investor. In today’s environment, it’s easy for investors to get influenced by misinformation that ultimately leads them to make sub-optimal investment decisions. We dedicated today’s episode to inspecting the process of evaluating different mutual funds, ETFs, or any other types of investment funds. Throughout the episode, we explore the process of due diligence and how to decide whether or not a potential fund is worthy of including in your portfolio.

 

 

Show Notes

[2:15] Sub-Optimal Investment Decisions – Why people make sub-optimal investment decisions by not using the right criteria to evaluate a standard investment fund.

[4:00] Terrible Evaluation of Potential Investments – Using the example of large-cap US equities, Grant explains how some of the most popular fund ratings do not provide a very good evaluation of potential investments.

[8:37] Structuring Your Portfolio – The most important decision one has to make in structuring a portfolio is allocating assets. Grant shares high thoughts on why this decision is far more important than focusing on a specific fund and how long-term asset allocation can improve the integrity of your portfolio.

[13:46] Evaluating Strategy – How to evaluate the strategies of different investment funds and how to decide whether the strategy of a specific fund aligns with your goals.

[18:05] Historical Performance – Why it’s important to take a look at the history, stability, and performance of the fund management company before you invest.

[21:33] Path to the Best Outcome – Wrapping up the episode, Grant shares his take on how having a consistent allocation, a consistent philosophy, and remaining invested through harsh conditions combine to create the path to the best investment outcomes.

 

Resources

ETFs vs. Mutual Funds: What’s the Right Investment Vehicle For You?
abovethecanopy.us/mutual-funds-vs-etfs-whats-the-right-investment-vehicle-for-you/

Mutual Funds Capital Gains Distributions: What They Are & How to Avoid the Tax Hit

Mutual Fund Capital Gains Distributions: What They Are & How to Avoid the Tax Hit

If you’ve ever invested in a mutual fund, you may know that they’re required to distribute at least 95% of their capital gains to investors each year.  You may also know from experience that these gains are not always welcome since they come with a tax liability attached.

More often than not these capital gains are not large enough to cause investors to stir.  But every year there are a few funds that pass massive unwanted gains on to investors, leaving them with a big, stinky tax bill.

This post may be slightly tardy given that some mutual fund families have already distributed their year end capital gains.  Nevertheless, it’s an important topic that you should be aware of and keep an eye out for.

If your objective is to minimize your tax bill (hint: it probably should be) you’ll want to know about upcoming distributions at the end of each year, and avoid them when it makes sense.  This post will cover exactly what capital gains distributions are, why mutual funds distribute them, and when and how you might want to avoid them.

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