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Gro w Y our Retirement Nest Egg

430 ETFs in the United States, holding about $430 billion in assets and
growing quickly.
ETFs are groups of stocks that track market indexes and stock sectors in
the United States and overseas. ETFs now exist for just about every stock
market, industry, and investment style. Among the most popular ETFs are
those tied to the Standard & Poor’s 500, the Dow Jones industrial average,
the NASDAQ 100 index, an index of non-U.S. stocks, and a group of equities
selected from many emerging markets, such as Hong Kong, Brazil, China,
and India.
ETFs offer three main advantages over traditional mutual funds:

1. They provide better trading flexibility. ETF shares trade like regular
stocks, at changing prices during the day. Mutual funds are priced only
after the market closes.

2. ETFs usually are more tax-efficient than actively managed mutual funds
(but not necessarily mutuals that are linked to market indexes). Stock
sales by actively managed equity funds can trigger big capital-gains
distributions that are taxable in regular accounts (but not tax-deferred
retirement plans).
3. Most ETFs carry lower annual management expenses than mutual
funds do.

In addition to enabling you to target many stock indexes around the
world, ETFs also now increasingly enable you to invest in relatively narrow
ways. Among these are commodities and individual currencies. You can also
“sell short” (betting on a price decline, market indexes, or industry sectors).
But unless and until you know what you are getting into, I advise you to use
ETFs for mainstream investment choices rather than very narrow ones by
sticking with the most actively traded ETFs.
Now we’re ready to look at bonds.

Bonds Offer a Steady Choice

For bonds, the question of whether to invest in individual issues or funds is
somewhat different than it is with stocks. The answer depends primarily on
the types of bonds you buy and how much you invest.
When you buy bonds directly, you lock in a yield that brings a steady
stream of interest payments, regardless of what happens to interest rates and

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