Welcome to money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein. Today is episode 467. It's titled How to Analyze EDFs to

make better investment decisions. Last week in episode 466 on dividend investing

I referred to an observation by Morningstar that since the beginning

of 2014, investors have withdrawn $1. trillion dollars from stock mutual funds at the same time

they've added 2.9 trillion dollars to stock exchange-traded funds.

An open-end mutual fund and EDFs are investment vehicles.

They are a means to invest in various assets, be it stocks, bonds, real estate, and many, many other

knit strategies. To start this episode, we're going to take a look at fun flows

into funds and EDFs, what has changed over the past number of years, and

why ETFs have become the preferred investment vehicle for individual investors and even in many cases

institutional investors. We'll see why that is and because EDFs have become so dominant and attractive, we'll look at, well, how do we go about

analyzing these ETS? Because the sheer number of ETSs outstanding can be overwhelming.

First, let's take a look at a study by Morningstar looking at overall flows into both open and mutual funds and ETS. The difference between the two is an

open and mutual fund doesn't trade on an exchange. It trades at the end of the

market day and shares of the open-end mutual fund are bought and sold at the closing

net asset value.

That differs from exchange-traded funds, which trade throughout the market day, and that trading occurs at a market price that may differ slightly from the net acid value.

And the net acid value of a mutual fund or an EDF is the value of the assets held by that

investment vehicle divided by the number of shares outstanding so that would be the

net asset per share.

Now there are market mechanisms in place to keep an E.T.F's price in line with its net asset value.

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