No. of Recommendations: 1
Here's a way to visualize the difference between investing in individual stocks and investing in a mutual fund:

Of course, the cost of this kind of diversification is a reduction..and sometimes a significant reduction, in income.

If XYZ income mutual fund has an annual expense ratio of 1% and is yielding say, 3%, then roughly one third of the investor's income is consumed in fund expenses.

Income oriented ETFs reduce this expense. If XYZ ETF has an expense ratio of .25%, then the investor is being charged about 8% of the fund's income.

And other than original purchase trading commissions, a basket of income stocks eliminates this ongoing expense.

BruceM
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