Wed07302014

News

‘Brown is the new green,’ says local water district

‘Brown is the new green,’ says local water district


Lina Broydo/Special to the Town Crier
Are downtown Los Altos flower pots getting too much water? The Santa Clara Valley Water District plans to hire “water cops” to discourage overwatering.

The Santa Clara Valley Water District is spendi...

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Schools

Foothill camps prepare local students for STEM careers

Foothill camps prepare local students for STEM careers


Photos Ellie Van Houtte/Town Crier
Middle school students make robotic hands using 3-D printers during a STEM Summer Camp at Foothill College.

From designing roller coasters to developing biodegradable plastics, high school students received an i...

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Community

Local entrepreneur opens home to Afghan and Rwandan women

Local entrepreneur opens home to Afghan and Rwandan women


Ellie Van Houtte/Town Crier
Businesswomen Joan Mazimhaka of Rwanda, third from left, and Fakhria Ibrahimi of Afghanistan, in orange, traveled to the U.S. with a 26-woman delegation through the Peace Through Business program.

Employees scoop ice ...

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Comment

Moving on: The Rockey Road

Just over a month ago, we decided to put our house on the market. My husband and I had been tossing around the idea of moving back to the area where we grew up, which is only approximately 40 minutes from here. Of course, Los Altos is a great place t...

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Business

Halo heads to Los Altos: Blow-dry bar founder opens new First Street location Monday

Halo heads to Los Altos: Blow-dry bar founder opens new First Street location Monday


ElLie Van Houtte/ Town Crier
Armed with blow dryers, Halo founder Rosemary Camposano, left, and store manager Nikki Thomas prepare for the blow-dry bar’s grand opening on First Street Monday.

A blow-dry bar is set to open downtown Monday, and i...

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Books

"Frozen in Time" chronicles harrowing WWII rescue attempts


Many readers can’t resist a true-life adventure story, especially those that shine a spotlight on people who exhibit supreme courage in the face of adversity and end up surviving – or not – against the odds.

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People

CARSTEN HUGHES

Long time Los Altos resident, Dr. Alfred Hughes, died May 1st after a long illness. Dr. Hughes was born in 1927 in Maspeth, NY. He served in the US Army from 1945-6, attended Brooklyn Polytechnic University, then graduated from Reed College in Portla...

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Travel

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway


Courtesy of Ritz-Carlton
The Ritz-Carlton in Lake Tahoe offers fall getaway packages that include spa treatments and yoga classes.

Fall in North Lake Tahoe boasts crisp mornings and opportunities to spend quality time in the mountains. Specially ...

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Stepping Out

'Wizard' winds down at Bus Barn

'Wizard' winds down at Bus Barn


Town Crier file photo
Local actors rehearse a scene from “The Wizard of Oz.”

Los Altos Youth Theatre and Los Altos Stage Company’s collaborative production of “The Wizard of Oz” is slated to close Sunday at Bus Barn Theater, 97 Hillview Ave.

T...

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Spiritual Life

Stanford University appoints new dean for religious life

Stanford University appoints new dean for religious life


Shaw

Stanford University named the Very Rev. Dr. Jane Shaw, dean of Grace Cathedral in San Francisco, its new dean for religious life.

Provost John Etchemendy announced Shaw’s appointment July 21, adding that she also will join the faculty in...

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Magazine

Festival features fun for everyone

Festival features fun for everyone


TOWN CRIER FILE PHOTO
The Los Altos Arts & Wine Festival boasts more than 375 craft and arts booths.

This weekend’s 35th annual Los Altos Arts & Wine Festival promises to be jam-packed with fun activities for just about everyone. The eve...

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Examining the choice between mutual funds and ETFs

Following is the first in a two-part series on mutual and exchange-traded funds.

You’re probably familiar with mutual funds. They are arguably the most common type of investment choice for 401(k) and other retirement accounts.

Exchange-traded funds (ETFs), by contrast, have only been around since the early 1990s and have yet to find their way onto many retirement plan menus. But they are widely available for brokerage accounts and since 2008 have experienced explosive growth. You may be wondering what the difference is between the two types of funds and which makes a better investment.

ETFs, like traditional mutual funds, represent a basket of assets such as stocks or bonds. Unlike mutual funds, investors cannot buy ETF shares directly from the investment companies that offer them. Instead, investors must buy ETFs from other investors, just like stocks. That has two implications: (1) You can buy ETFs anytime during the trading day, unlike mutual funds, which can only be purchased at the end of the day after their net asset values have been calculated, and (2) during periods of high demand, the prices of ETFs can exceed the net asset value of their underlying assets.

Because buyers generally do not want to pay more than an ETF is worth, something is needed to keep the price close to the ETF’s net asset value. The solution is to allow certain financial institutions, known as authorized participants, the ability to purchase and redeem blocks of ETF shares, called creation units, directly from the ETF company. This approach gives ETFs an arbitrage mechanism that tends to minimize the potential deviation between the market price and the net asset value of the ETF’s shares.

If there is strong investor demand for an ETF, its share price will (temporarily) rise above its net asset value per share, giving authorized participants an incentive to purchase additional creation units from the ETF and sell the component ETF shares in the open market. The additional supply of ETF shares reduces the market price per share, generally eliminating the premium over net asset value. A similar process applies when there is weak demand for an ETF, and its shares trade at a discount from net asset value.

Creation-unit purchases and redemptions are in kind – meaning that the underlying assets are traded back and forth rather than bought and sold – allowing the authorized participants to swap out low-basis shares for high-basis shares without having to pay tax. As a result, ETF proponents argue that ETFs are more tax efficient than mutual funds, which cannot be traded like that.

Another professed benefit of ETFs is the lower expense ratio – the annual costs fund holders have to pay to the fund companies – compared with mutual funds. While true in the aggregate, this is really due to the fact that the majority of ETFs are passively managed and based on indices created and updated by various other financial institutions. There are numerous examples of mutual funds in certain asset classes that are less expensive than their ETF counterparts.

Craig Israelsen, associate professor at Utah Valley University, recently attempted to quantify the performance difference between mutual funds and ETFs. In part 2 of the series, I’ll share his findings.

Los Altos resident Artie Green is a Certified Financial Planner and principal at Cognizant Wealth Advisors. For more information, call 209-4062 or email This email address is being protected from spambots. You need JavaScript enabled to view it. .

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