Let’s Face it, Women Control the Wealth!
Here are the facts….
- 51% or $14 trillion, of American personal wealth are now controlled by women.1
- 67% of women over 50 years old share in decision-making for finances with their spouses.2
- Women will control about $22 trillion by 2020, half of all private wealth.3
- Women are set to inherit $28.7 trillion in intergenerational wealth transfers over the next 40 years.4
So here are 4 Reasons Women should consider using ETFs in their retirement portfolios:
What is an ETF?
An ETF is a type of fund that owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. The actual investment vehicle structure (such as a corporation or investment trust) will vary by country, and within one country there can be multiple structures that co-exist. Shareholders do not directly own or have any direct claim to the underlying investments in the fund; rather they indirectly own these assets. ETF shareholders are entitled to a proportion of the profits, such as earned interest or dividends paid, and they may get a residual value in case the fund is liquidated. The ownership of the fund can easily be bought, sold or transferred in much the same way as shares of stock, since ETF shares are traded on public stock exchanges. 5
ETFs (Exchange Traded Funds) trade intraday, they are “exchange-traded”, just like stocks. You can buy or sell throughout the day when the market is open. Mutual Funds do not trade during the day and the buy or sell of shares only happens once per day, at the end of the trading day, after the markets close. For this reason, it makes mutual funds less attractive in a volatile stock market.
ETFs disclose their full portfolios, companies that represent the holdings in an ETF, on public, free websites every single day of the year. Investors know what they are invested in and where the money is allocated.
Mutual Funds only disclose their holdings quarterly – and then only with a 30-day lag. In between reporting periods, investors have no idea if the mutual fund is invested.
Related: What’s the Deal with Annuities?
#3 Lower Fees
ETFs generally offer lower expenses than mutual funds. ETFs have little to no trading costs, tend to require less marketing and often fewer distribution costs versus mutual funds. Mutual funds have administrative fees, management fees, 12b-1 fees (marketing fees), and transaction expenses (within the fund). Index mutual funds are a close second, but generally, ETFs are cheaper. The lower the expense ratio, the more savings to the investor.
#4 Tax Efficient
ETFs tend to be more tax efficient than mutual funds because of how they interact. The mechanics of how ETF shares are created and redeemed is the true answer. When mutual fund investors want their money back, the mutual fund sells securities to raise cash to meet that redemption. This causes a reaction to the entire portfolio and effects all of the shareholders, hence more capital gains than ETFs. Also, if a mutual fund or ETF holds securities that have gone up in value and then sells them for any reason, they can create a capital gain and by law, they must pay them out to shareholders at the end of each year.
As we discussed earlier, women control the wealth and should consider ETFs in their portfolios versus mutual funds. If you’re still using mutual funds and would like to see how we could potentially increase your performance while decreasing your costs, then contact us through our website at www.crosspointwealth.com
1 Why Has Women’s Economic Power Surged? Five Stats You Need to Know, Forbes, 1/31/2017
2 2016 Insurance Barometer Study, LIMRA
3 Top 10 Things Everyone should know about women consumers, Forbes 1/21/2015
4 Five Reasons Women Are Taking the Lead in Financial Planning, Forbes, 8/8/2017
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