QUESTION: Charles on Facebook asks what Dave thinks of an exchange-traded fund (ETF) as an investment device. Dave explains what it is and why he doesn’t like it.
ANSWER: The main reason to do an ETF is that it allows you to trade your stocks or trade your mutual funds easily and often. I don’t believe in that strategy. That implies you are trying to time the market, and you’re trying to buy things at the low point and ride them up to the high point. I am a buy-and-hold guy based on my understanding of the market, so I have no need for ETFs for that reason. I wouldn’t recommend them because I don’t recommend you buy and sell all the time.