I mentioned this back in October, but it bears repeating: Don't buy mutual funds right now.

This month will see a huge outpouring of dividends and capital gains from mutual funds in the form of year-end distributions. Portfolio managers have spent the last month sprucing up their portfolios (your portfolios), aligning them with those hottest of the hot sectors so you'll like what you see they've invested in come annual report time. They've also just about run through all their losses from the dot com bust.

First off, Happy Halloween. Market futures are looking bright at this hour of the morning. Let's hope the Fed's policy statement at the end of the trading day keeps it that way for tomorrow.

Now, as for the real business of this article... Did you happen to see this Wall Street Journal article by Johathan Clements entitled When ETFs
Are Better Than Index Funds? My first thought on reading it through was that he'd gotten it right. On further inspection and reflection, I'm not so sure.

I just wanted to put out a friendly reminder that if you've been considering moving out of mutual funds and into exchange traded funds, now is the time to get moving. Between now and the end of next month is prime time to implement this strategy. Here is why, and also why you should at least stop investing in mutual funds for a while.

You probably know that I'm a big advocate of ETFs, also known as Exchange Traded Funds. You buy an ETF the same way you buy a stock. The difference between an ETF and a stock is that the ETF security itself is a share in any number of individual stocks or other securities. The combination of securities that make up the ETF security gives the ETF it's character. For instance, you can buy an ETF which represents the real estate market, or a basket of bonds or even the S&P500.

In that sense, ETFs are a lot like Mutual Funds. Unlike Mutual Funds however, ETFs are not actively managed. Once the basket of stocks is selected for an ETF, the management job has little to do with stock selection. As a result of not having active management, ETFs feature drastically lower management fees. And that's why I favor them for my investment portfolios.