Whether it is a classic mutual fund or an exchange-traded fund (ETF), buying on the basis of past results is never a harbinger of future results. Research bears this out. Fund managers change positions, so you never know who will be at the job and for how long. Besides, they are always subject to conventional, unpreventable investment mishaps.
What is stable from past experience is the fund’s cost of operation. The lower the cost the better.
ETFs are growing faster than conventional mutual funds. While their cost of operation are generally lower, there are safeguards to observe in their choice. Some have a noted lack of liquidity which make for wide differences in their bid and ask spreads, or what you pay for them or get for them, when trading.
Those who specialize in arcane securities may have problems tracking proper indexes. Others may not do as well as competing ETFs in a particular index track. Also, there may be too much difference between the market trading price of some ETFs and their underlying value of holdings, or NAV (Net Asset Value).
So, it’s often not fund management, but the fund itself that you watch.
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