I-1 Discussion: Comparing Mutual Funds to Exchange-Traded Funds Introduce yourself briefly. Discuss your prior knowledge of and interest in the course topic. Also, explain how this course will assist you in your career path.
Visit Morningstar, Yahoo! Finance, Google Finance, or Bloomberg_to identify the top 10 holdings, previous year's performance, and expected dividend yield, expense ratio, and minimum investment amount for one mutual fund and ETF of your choice. Avoid duplicating a fund posted by a classmate identify one advantage and one disadvantage of mutual funds and ETFs for investors.
Mutual fund: Fidelity 500 Index Fund (FXAIX) Top Holdings % Assets Apple(AAPL) 6.14% Microsoft Corp (MSFT) 5.75% Amazon.com Inc (AMZN) 3.83% Facebook Inc Class A (FB) 2.29% Alphabet Inc Class A (GOOGL) 2.17% Alphabet Inc Class C (GOOG) 2.07% Tesla Inc (TSLA) 1.42% Berkshire Hathaway Inc Class B (BRK.B) 1.41% NVIDIA Corp (NVDA) 1.30% JPMorgan Chase & Co (JPM) 1.23%
2020 Total Return 18.4%, Yield 1.24%, Expense Ratio 0.01%, minimum investment $0
Some advantages of mutual funds are the professional management, convenience, and diversification. Some disadvantages of mutual funds are high fees, only traded once a day, and "distributions are taxed at either ordinary income rates or capital gains rates, depending on how long the fund held an investment, which means you might be left with a higher-than-expected tax bill at the end of the year" (Haegele, 2021).
ETF: iShares Russell Top 200 Growth ETF (IWY) Top Holdings % Assets Apple Inc (AAPL) 12.97% Microsoft Corp (MSFT) 12.16% Amazon.com Inc (AMZN) 8.18% Facebook Inc Class A (FB) 3.95% Alphabet Inc Class A (GOOGL) 3.74% Alphabet Inc Class C (GOOG) 3.74%
Tesla Inc (TSLA) NVIDIA Corp (NVDA) Visa Inc Class A (V) The Home Depot Inc (HD)
3.02% 2.64% 2.36% 2.00%
2020 Total Return 39.03%, Yield 0.57%, Expense Ratio 0.20%, minimum investment $0
Some advantages of an ETF are diversification, lower costs, and very liquid since they can be traded anytime (intraday). Some disadvantages are over diversification due to the ETF not actively managed so it may not own the best stocks, and most ETFs don't rebalance their portfolios and you may end up owning more overpriced stocks than value stocks (Faulkenberry, n.d.).
Faulkenberry, K. (n.d.). What is an ETF? Advantages & disadvantages. Arbor Investment Planner. https://www.arborinvestmentplanner.com/what-is-an-etf-advantages-disadvantages- newsletter/
Haegele, B. (2021). Mutual funds: Advantages and disadvantages for investors. Bankrate. https://www.bankrate.com/investing/mutual-funds-advantages-disadvantages/
Yahoo! Finance. (2021, October 27). Fidelity 500 Index Fund (FXAIX) https://finance.yahoo.com/quote/FXAIX?p=FXAIX&.tsrc=fin-srch
Yahoo! Finance. (2021, October 27). iShares Russell Top 200 growth ETF (IWY). https://finance.yahoo.com/quote/IWY?p=IWY&.tsrc=fin-srch
Netflix has the highest average monthly return between the three investments. This could be due to the recent rapid growth of streaming services during COVID. Coca-Cola on the other hand, had the lowest average monthly return, but this is understandable given the fact that everything has been closed and half of their business worldwide is from events/ gatherings, restaurants, and stores (Kempner, 2021). Lastly, the S&P 500 has seen the steadiest growth out of the three, indicating that it could be a more stable/ safe investment. "Investors