Morningstar Advisor - October/November 2013 - (Page 10)

On Topic Do Mutual Funds Still Have a Role? Let us know your thoughts at We exclusively use mutual funds. They have an extremely important role to play in portfolios. It is essential to have investments that are actively managed. Due to the volatility and complexity of markets, it is imperative that investments are made by skilled, experienced, and talented managers who can manage risk and monitor valuation. Sam Sudame, CFA, CFP Singer Xenos Wealth Management Coral Gables, Fla. ETFs are a good choice if indexing and passive investing is your objective. But in the areas where active management can make a difference in returns, ETFs can’t do the job, unless you inject management, and when you do that, you increase their costs, which diminishes or eliminates the lowcost advantage of the ETF. Other than the fact that an ETF can trade intraday, I can’t see much difference between a managed ETF and a good old-fashioned no-load mutual fund. David S. Bowman, CLU FSC Securities Corp. Williamsville N.Y. Our firm uses ‘40-act mutual funds exclusively, whether they are actively or passively managed. We believe mutual funds will continue to play a critical role in both retail and advisor portfolios for years to come. The ETF space has had a positive influence on the fund world in that funds have become more tax sensitive, cost conscious, and transparent. But I do not see mutual funds going the way of the dinosaur as some have predicted. There has been 10 Morningstar Advisor October/November 2013 a substantial improvement in the way firms deliver information about their funds. The industry is adapting and will continue to adapt to a changing environment. Jack Riashi, CFP Bloom Asset Management Farmington Hills, Mich. Quick Poll (Sept. 10, 408 responses) 1 How important to you is an investment strategy’s vehicle (open-end mutual fund, ETF, separate account, etc.) when deciding whether to invest in it? be an indexer as the experts say the numbers prove it. But I’ll take well-managed mutual funds, especially bond funds. I put a lot of effort in my bond investing as I am 71 and several clients are fully retired. I think that all those people who own Vanguard Total Bond Market or iShares Core Total US Bond Market ETF AGG or other index funds are in the wrong funds. There is the argument about the use of managed funds versus index funds, but the discussion always relates to stock funds. It is more obvious that investing in one of the better intermediate bond funds instead of an index fund will give incrementally better results over the long run. Gary Orkin Orkin Financial Planning Berkeley, Calif. I still use ‘40-act mutual funds. I believe in active management of investments and am a firm believer that over time active management will produce better results than following indexes. Dennis Young Young/Ditto Financial Group Elizabethtown, Ky. 59.6% Somewhat important I am a real math guy. I have two degrees in engineering, and I “live” in Excel. I should Very important 32.3% Not very important 6.9% Not important at all 1.2% 2 Have ETFs changed the way you manage your clients’ assets? Yes, significantly 18.6% Yes, somewhat 46.1% No 35.3% 3 Has your use of open-end mutual funds increased, declined, or stayed the same over the past five years? Increased 18.3% Declined 37.3% Stayed the same 44.4% 4 Have you ever invested or considered investing in an active ETF for clients? Yes 54.5% No 45.5% 5 Have you used or considered using a unified managed account for clients? Yes 31.2% No 68.8%

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2013

Morningstar Advisor - October/November 2013
Letter From the Editor
How to Make Social Media Work for You
Do Mutual Funds Still Have a Role?
More Personal Than Finance
How to Handle Your TIPS Positions
A Real Estate Veteran Starts From Scratch
Investments á la Carte
Investment Briefs
When to Say No
Take a Guarded Approach to Homebuilders
Fund Distribution Has Been Turned on Its Head. Now What?
Winning the Distribution Battle
Active ETFs Wait for Their Heyday
A Fund Firm Defies Indexing Trend
Piloting New Channels
A Good Fit
The Predictive Power of Fair Value Estimates
Does Being Prudent Pay Off?
Utilizing Utilities’ Total Return
Stuck in the Middle Is Not a Bad Place to Be
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Good Guys Win

Morningstar Advisor - October/November 2013