Taking Stock- Exchange traded funds

   Dear Mr. Berko: I don't know much about exchange traded funds and figure it's about time I became knowledgeable. I recently heard that there are several brokerages that will let you buy exchange traded funds without paying a commission. Is this true, or is this one of those sock-it-to-the-listener satellite radio adverts where the advertiser bamboozles the listener and debits his checking account? If it's real, how do I take avail myself of this good fortune? And how would you recommend that I become more familiar with these ETFs that so many investors seem to find attractive? But I think I would feel a little guilty investing $30,000 to $40,000 in an ETF and not paying even a token commission for the broker's help.
   S.A., Rochester, Minn.

   Dear S.A.: No. There's no hook, there's no catch -- it's straight on, it's real and it's not one of those sucker satellite radio money-back guarantee advertisements that cling to your credit card like a lien.
Yes. You can purchase 26 different ETFs from Fidelity Investments, a subsidiary of Fidelity Management, the huge mutual fund company that manages either more than a trillion or less than a trillion dollars of prominent mutual funds. The 26 various commission-free ETFs are iShares, the portfolios of which are managed by Black Rock, also a formidable money management firm and a spinoff from the iniquitous Blackstone Group (BX -- $10.09). Black Rock's estimable ETFs do a yeoman's job of covering the landscape. Its ETFs track indexes of stocks of various-sized U.S. companies, foreign stocks, foreign bonds, value stocks, growth stocks, TIPS, muni bonds, corporate bonds and the various Russell and S&P Indexes. Check it out on www.Fidelity.com and look for iShares ETFs.
And not to be outdone, Charles Schwab has eight of its own ETFs that you can purchase without paying a penny, pfennig or peso. You can choose from several indexes that track small- or large-cap issues, foreign stocks, or emerging market issues. Just let your fingers do the walking at www.Schwab.com.
   And if you truly feel guilty about not having to pay a commission for your ETF purchases, you might consider making a donation to the Barack Obama Presidential Library Fund, which may or may not be tax deductible. It will be the first presidential library in Chicago.
   Years ago, I was apprehensive about ETFs and thought of them as an exotic breed like collateralized mortgage obligations and credit default swaps. And about seven years ago, I had a cognitive epiphany when the AC in a new car I bought in Florida went on the fritz and the dealer in Atlanta gave me a hard time about fixing it. It's a long story, and I might tell it some time. But now, I think ETFs are the cat's meow, the bee's knees and better than sliced bread when compared to most mutual funds.
   ETFs are constantly priced during the trading day, just like the shares of thousands of listed company stocks that trade on the exchange. So if the market is crashing or soaring and you want to get in or out during the trading day, an ETF (unlike mutual funds) allows you to do so prior to dramatic price changes.
   I also like the convenience of "stop-orders" that will automatically buy or sell your shares at a price you specify in advance. And you can easily move up or down the trigger points as the market direction changes.
   I also like the fact that you can direct a laser-like exposure to a specific industry sector, which is quite difficult to do with sector mutual funds. Sector mutuals tend to focus on broad segments of an industry, which include peripheral issues. And in doing so, too many mutual funds charge huge fees. So ETFs allow you to design your portfolio with surgical precision at a much lower expense ratio.

   Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2008 CREATORS SYNDICATE, INC.

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