Mutual Funds and ETFs

Mutual Funds and ETFs

In this edition of our Technical Tuesdays videos, Mary Ann explains the types of investments FSA uses to manage client portfolios.

Mutual Funds and ETFs Transcript

Hello, and welcome to this edition of Technical Tuesday. I’m Mary Ann Drucker, Assistant Portfolio Manager with Financial Services Advisory. Today, I’m going to talk about the types of investments that FSA uses to manage client portfolios. And I want to focus on three key points.

The first one has to do with minimizing the effects of risk and volatility on portfolios. Investing in individual securities, such as stocks, comes with inherent risk and volatility. A good example of this is with PG&E, a utility company. Its stock had a sharp drop out of the blue last fall on news related to the wildfires in California. It’s this kind of security-specific volatility that FSA strives to minimize by using what are called pooled investment instruments, such as open and mutual funds and exchange-traded funds or ETFs for short. Mutual funds and ETFs are called pooled investments because they consist of individual stocks and bonds that are purchased by the fund manager and pulled together into an index or a basket if you will. Some stocks or bonds in this basket might rise on a certain day while others might fall, thereby offering a smoother journey overall than what you might otherwise experience with individual securities.

A second key point has to do with how this basket of securities in a mutual fund or ETF is managed. This basket or portfolio might be professionally invested by a fund manager who brings a unique skill or specialty to the table. In this case, the fund is considered an actively managed fund. Alternatively, the portfolio might be structured to simply track a particular index, such as the S&P 500, with no active management involved. This passive investing is simply a way to gain exposure to a particular index. FSA uses both actively managed funds and index funds in the portfolios.

And finally, FSA uses mutual funds and ETFs as a way to gain access to certain securities, such as commodity funds or inverse funds, that aren’t readily available in other investment structures.

Well, that’s it for this edition of Technical Tuesday. If you have any questions on this content, please don’t hesitate to call or email us. Until next time, thank you for watching.

 

 

FSA’s current written Disclosure Brochure and Privacy Notice discussing our current advisory services and fees is available at www.FSAinvest.com/disclosures or by calling 301-949-7300.

 

 

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