Between mutual funds and exchange-traded funds, mutual funds are still by far the most popular choice among America's "main stream" investors. Accordingly, mutual funds are also the most-sought vehicle among our representatives and clients. For those who do not know, the next several paragraphs summarize these two investments vehicles and the primary differences between them.

Mutual funds are pools of money that are managed by an investment company and regulated by the Investment Company Act of 1940. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. No-load funds impose no sales charge. Some of the advantages of mutual funds include diversification amongst various asset classes, styles and sectors, liquidity, active security selection, low purchase minimums, and convenience.

Like mutual funds, exchange-traded funds (also known as ETFs) are available in shares. When the value of the total shares outstanding is combined, it represents a large pool of investors' money. Here's how they differ:

• ETFs are not managed and offer investors no active security selection within the fund. Instead, they give investors "mirrored" exposure to specific indicies.
• Shares of ETFs trade all day on a stock exchange. This can equip investors with additional flexibility, such as incorporating stop losses as part of an investment strategy.
• Because ETFs are unmanaged, their expense ratio's are typically well below those of traditional mutual funds. Still other costs may apply to ETF transactions. For example, the costs involved with placing a buy or sell order can be similar to those charged for trading shares of common stock on the NYSE or NASDAQ.