Trend Tracking: ETFs or No Load Mutual Funds?

Ulli Uncategorized Contact

In my advisor practice, my mode of operation is to use both, ETFs and No Load Mutual Funds depending on what I’m trying to accomplish. Generally speaking, I prefer ETFs when investing in more volatile areas such as sectors and countries. This eliminates the problem of possibly increasing costs by having to deal with early redemption fees.

Of course, my main criterion for using either is the performance and ranking as per my M-Index. After all, only performance will grow your portfolio. However, if your preference would be the use of no load funds, how could you circumvent frequent trading rules and other charges?

MarketWatch featured a recent story titled “Trading Places,” which describes the benefits of having an account at a progressive fund company such as ProFunds. Having an account there entitles you to trade as frequently as you wish among ProFunds’ 13 single-beta funds and money market fund. Additionally, you have access to leveraged and inverse funds.

ProFunds momentum data are listed in my weekly StatSheet for easy tracking. Rydex has a similar program you might want to look into. If your preferred investment vehicle is mutual funds along with the freedom to trade as you wish, you owe it to yourself to check these companies out.

Disclosure: I have no affiliation with either company or any investments in any of their funds at this time.

Contact Ulli

Comments 8

  1. You can trade ProFunds and Rydex at E-Trade and Schwab as frequently as you wish without transaction costs or early (short term) redemption fees. The benefit at these two brokers is that you are not locked into a single Fund Family account and you have access to ETFs and to both ProFunds and Rydex. Another advantage is the lower investment minimums at the brokers.

  2. This is an excellent page for a chapter in Investing 101. Clear and concise information such as this is often overlooked by those who lose sight of, or who are just plain not aware of the kinds of things individual investors want to know. One of your strong points, Ulli.

  3. I agree with the above post taht if you have an account with ProFund and Rydex then you will be locked into that fund family (at least for that portion of the fund you are committing with them).
    Regarding buying them through Schwab:
    Schwab charges $ 49.95 as short term redemption fee, if you sell within 90 days of purchase. (this is true for retail customers, I think. I do not know if Uli can get away with it).Stranger

  5. ProFunds and Rydex do not have a short term redemption fee at Schwab. Go to Mutual Funds, Browse for funds By Fund Company, select ProFunds or Rydex. Select a fund, then go to the Fund Facts & Fees tab. On the right column, under Schwab Fees, notice that for Transaction Fee and Short-term Redemption Fee is “No”. I have traded ProFunds at Schwab and was stopped out after 10 days back in March and was not changed any fees to buy or sell. I can’t comment on what Schwab would do if you abuse this by trading too often like some Mutual Fund companies do (ie Vanguard).

    Here are links on Schwab. I picked the first Fund listed on Ulli’s Domestic Fund Families (#2).

    ProFunds OTC OTPIX:
    http://www.schwab.com/public/schwab/research_strategies/mutual_funds/summary/non_schwab/facts_fees.html?cmsid=P-1018870&lvl1;=research_strategies&lvl2;=mutual_funds&refid;=P-1017766&refpid;=P-1018795&ticker;_sym_nm=OTPIX&schwabplan1;=

    Rydex OTC RYVYX:
    http://www.schwab.com/public/schwab/research_strategies/mutual_funds/summary/non_schwab/facts_fees.html?cmsid=P-1018870&lvl1;=research_strategies&lvl2;=mutual_funds&refid;=P-1017766&refpid;=P-1018795&ticker;_sym_nm=RYVYX&schwabplan1;=

    And to confirm Schwab’s Short-Term fee on another Mutual Fund Family:

    American Century Vista TWCVX:
    http://www.schwab.com/public/schwab/research_strategies/mutual_funds/summary/non_schwab/facts_fees.html?cmsid=P-1018870&lvl1;=research_strategies&lvl2;=mutual_funds&refid;=P-1017766&refpid;=P-1018795&ticker;_sym_nm=TWCVX&schwabplan1;=

    The full link may not come out in this blog. The Preview showed them cut off. If they don’t, the above comments should get you to the fund facts page.

  6. Hi Anonymous:
    At the same page at the bottom ‘read the footnotes; about Schwab charging $ 49.95 when you hold it for less than 90 days.
    When you sold your mutual funds, you would have been credited the net proceeds – mutual fund price/shaire * number of shares – $ 49.95
    Check the money credited to your account, the number of shares and the share prices after the close of the market on the day you sold.
    Or just call Schwab and speak to a mutual fund specialist.
    Yours,
    Stranger

  7. I checked my trade confirmations and statements and confirmed that I was not charged a tranaction fee to buy or sell nor was I charged a short term redemption fee for any ProFund I sold under 90 days. My account was credited with an amount based on the number of shares sold and the closing day price. Just to be sure that something hasn’t changed very recently, I called Schwab today and verified this information. They said the notes at the bottom of the page appear on all Mutual Funds but the Schwab Fees section on the Fund Facts & Fees is what applies. Schwab did say to be sure to verify each individual fund before you trade to be sure of the fees because it is possible that not all funds in a fund family will have this pricing.

    At E-Trade, every mutual fund page has the Early Redemption Fee noted at the bottom of the page but higher up, you will see a dash (-) for the Early Redemption Fee. At least they mention in the notes and in the same paragraph that Direxion, ProFunds, and Rydex and funds held at least 90 days are not subject to the Early Redemption Fee. I have traded Rydex Funds at E-Trade and was not charged these fees.

    In Summary: I have verified with the brokers via a telephone call, and verified this via the broker’s website, and have first hand experience with trading Profunds and Rydex and not being charged a transaction fee nor a short-term redemption fee on any fund that I held less than 90 days or even 30 days. This could change in the future so it is best to always check before trading.

    Whew! I hope this helps.

Leave a Reply