Investment Advice For ETF Investors
ETFs are the fastest growing investment around, with investors pouring large amounts of capital into these funds. They are similar to mutual funds but trade like a stock, and as they have grown in size and complexity it is important to get investment advice before taking the plunge into new ETF investments. Just as in purchasing a new car, you should always "look under the hood" of your new ETF investment before deciding to buy.
One tip to avoid picking a "clunker" ETF is to know what you own. Understand the fund's legal structure because some of them have important downsides that you should be aware of. For example, the oldest and largest ETF, the S&P 500-indexed SPY, does not allow dividend reinvestment. So for longer-term investors in SPY, you actually have a performance drag because the cash being paid out in dividends is just sitting in the fund not being reinvested.