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Basically, ETFs are baskets of securities that passively track stock-market indexes or financial indexes. Since ETFs mirror indexes, they don't have big management fees, nor do they generate as much trading volume (and commission costs) as actively managed mutual funds; when they do have portfolio turnover, it is often by swapping stocks instead of buying and selling them, which means they don't run up capital-gains taxes the way mutual funds often can. The result: lower overall costs for investors. The average annual fee for an ETF is 55 basis points (i.e., 0.55% of assets), significantly below...
Since most ETFs only mirror a market index, such as the S&P 500, they won't outperform the index. But increasingly, investors see that outperformance quest as more of a pipe dream. "Only 20% of [mutual-fund] portfolio managers actually beat the index that they're tracking," says John Spallanzani, director of ETF sales and strategy at GFI Group. "So if you put your money in an ETF, you're basically beating 80% of the mutual-fund managers out there." ETFs are also more liquid than mutual funds, because they can be bought, sold or shorted throughout the trading...
Advisers also warn investors to choose larger ETFs over smaller start-up ones, especially when it comes to global and emerging-market funds. Unlike mutual funds, investors face price spreads when buying and selling ETFs, and these spreads can be quite wide - spanning several percentage points in some cases - when the ETF is small or its underlying stocks don't trade much...
...managed mutual funds. "It's clearly a category that's attracting more interest among ETF providers and mutual-fund companies," says Standard & Poor's Tom Graves. "It combines the characteristics of a passive, index-based ETF with that of an actively managed mutual fund." (See pictures of the stock-market crash...
...Still, the opportunity that the agreement opens up for Southeast Asia is huge. According to HSBC, the China-ASEAN free-trade area will encompass 1.9 billion people and a combined GDP of $6 trillion. To capitalize on this vast market, economists advise Southeast Asian companies to specialize in niche goods and services that China cannot duplicate - and to do it fast. "Given the shifting nature of China's comparative advantage, Asian countries may best re-orientate their economies towards sectors that cannot be easily replicated by China," wrote Kit Wei Zheng, a Singapore-based economist with Citigroup...