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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Monday, May 22, 2006

EFT or Index Fund

EFTs are often less expensive to own than index funds, but the brokerage fees go along with EFTs so they are not always better. Here is how you can compare and decide:

  • If you dollar-cost average or invest in small amounts go with an INDEX FUND because brokerage fees on small amounts will eat up the EFT's savings
  • If you are investing a bonus, windfall or IRA rollover go with an EFT because transaction fees will impact your bottom line less
  • Make systematic withdrawals in retirement go with an INDEX FUND because the ETF transaction fees will eat up your returns
  • If you harvest tax losses go with an EFT because often mutual funds have redemption fees if held under a certain time limit

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