Exchange Traded Funds or Mutual Funds?

In the last 10 years a new class of fund has come up: Exchange Traded Funds (ETFs). These new funds are completely transforming the fund industry, putting a lot of pressure on mutual funds. So if you save money and plan to retire some day, you should know about this.
How does Exchange Traded Funds (ETFs) work? Instead of having accounts that customers credit by wiring their money in an account with a fund institute, Exchange Traded Funds (ETFs) list shares in the market that investors simply buy online. When investors buy ETFs shares online, the ETF fund company receives the money and invests it. Moreover in traditional mutual funds, a fund manager takes many investment decision in a very secretive manner, but Exchange Traded Funds (ETFs) usually have predefine strategies to automate the investment process much more than traditional mutual funds where most steps in the investment process are still manual.
Well you might ask: what's the point? The point is that ETFs management is automated so ETFs get much much cheaper to operate. ETFs are run by young technology savvy companies and they have much lower fees than mutual funds. We are talking about 10 times lower fees. So the investors pay less on every dollar invested.
On the investment side Exchange Traded Funds (ETFs) are usually transparent about their investment strategies. These funds often simply follow a specific index, or buy specific products or financial instruments so you get exposure to a specific commodity price, like gold. So ETFs have very simple strategies that are effective to follow the market. On the other hand mutual fund managers or hedge funds managers often have secretive complicated strategies based on an superior "insight" in the markets that they claim to have, they take a lot of secretive and complicated decisions in order to do better than the market. But they have sadly been very much discredited in the past years, as it turns out that they do not have such great "insight" after all! At best they follow the market and often they do much worse than the markets. Several independent studies conducted by researchers at leading US universities (among which Harvard) actually highlight the fact that extremely often Exchange Traded Funds (ETFs) show better investment returns than Hedge Funds or Mutual Funds.

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