The Wisdom of Investing in ETFs

David Gaffen

For decades, mutual funds were the asset structure that brought Wall Street home to Main Street. Sure, you could buy individual shares, but many were too frightened to engage in such a game. As a result the mutual fund—where for a fee, a manager bought a basket of stocks hoping to outperform the market—became the investment vehicle of choice for most Americans saving for college or retirement.

Mutual funds are pretty limited in terms of the type of assets they’re buying; however, as of December 2009, there were $11.1 trillion in mutual funds, and stock funds accounted for nearly half of that. Money market funds were about $3.2 billion, and bond funds another $2 billion, according to the Investment ...