What’s the difference between active and passive investing?
Active investing tries to beat the market. Passive investing tries to match it.
A benchmark is the yardstick. The S&P 500, for example, tracks America's 500 largest publicly listed companies. A professional money manager running an active fund picks stocks they believe will do better than the S&P 500. A passive fund that tracks the S&P 500 would just invest in these 500 stocks.
Since the first SPIVA report in 2002, most active managers have not beaten their benchmarks over the long run. Past performance doesn't predict future results, but staying diversified and keeping costs low are two things you can control. Diversification does not ensure a profit or protect against loss.
Atomic Invest LLC, an SEC-registered investment adviser, builds and manages the low-cost, passive ETF portfolios available through Cleo. Cleo does not select investments or provide investment advice.
How does an ETF work?
An ETF pools money from many investors to buy assets like stocks and bonds. Buy a share of the ETF and you get a slice of everything it holds, so you're diversified from day 1.
ETFs trade on an exchange, so you can buy and sell at live prices while markets are open. Mutual funds are priced just once a day.
ETFs can also be more tax-efficient than mutual funds because of a structural feature that generally allows them to adjust their holdings internally with fewer taxable capital gains distributions. ETFs can still distribute capital gains, and tax treatment depends on your own circumstances. This is not tax advice.
What are the fees for investing in ETFs?
ETFs charge an ongoing fee called an expense ratio. It’s a small percentage of the fund’s assets, taken from the fund itself rather than billed to you directly.
Say you invest $1,000 in a fund with a 0.10% expense ratio. That's about $1 a year. This example is hypothetical and for illustration only. Expense ratios vary by fund.
The fee covers the cost of running the fund. Every ETF publishes its expense ratio in a document called a prospectus, so you can check it before you invest.
You can invest in ETFs through the Smart Investing account, which is managed by Atomic Invest. The advisory fee is separate from, and in addition to, the expense ratios charged by the ETFs in your portfolio.
More information on Advisory Fees can be found here.
Investment advisory services provided by Atomic Invest LLC. Brokerage services provided by Atomic Brokerage LLC, member of FINRA/SIPC. Investments in securities: Not FDIC Insured, Not Bank Guaranteed, May Lose Value. Investing involves risk, including the possible loss of principal.
Cleo has engaged Atomic Invest LLC (“Atomic”), an SEC-registered investment adviser, to bring you the opportunity to open an investment advisory account with Atomic. Companies which are engaged by Atomic receive compensation of 0% to 1.15% of assets under management annualized, payable monthly, for each referred client who opens an Atomic account and may receive a percentage of margin and free cash interest earned by clients, which creates a conflict of interest. See the Atomic Invest Promoter Disclosure Statement.
Brokerage services for Atomic are provided by Atomic Brokerage LLC, a registered broker-dealer and member of FINRA/SIPC and an affiliate of Atomic, which creates a conflict of interest. For more details about Atomic Invest, please see the Form CRS, Form ADV Part 2A, and Privacy Policy. For more details about Atomic Brokerage, please see the Form CRS, General Disclosures and fee schedule. Check the background of Atomic Brokerage on FINRA’s BrokerCheck.
Neither Atomic Invest LLC nor Atomic Brokerage LLC, nor any of their affiliates is a bank. Investments in securities: Not FDIC Insured, Not Bank Guaranteed, May Lose Value. Investing involves risk, including the possible loss of principal. Before investing, consider your investment objectives and fees and expenses charged. Advisory services through Atomic are not to be construed as tax advice or financial planning and do not take into consideration investments that clients may hold outside of Atomic.
Before investing in an ETF, you should read the prospectus, which provides detailed information on the ETF’s investment objective, principal investment strategies, risks, costs, and historical performance (if any), among other things. Prospectuses can be found on the ETF issuer’s website. ETFs are bought and sold at market price, which can vary from the Net Asset Value of the fund. Rebalancing and other fund activities may result in tax consequences.
This content is for educational purposes only and is not intended as investment advice or a recommendation of any specific investment or strategy.