Exchange Traded Funds (ETFs) may now become popular in 401(k)s. My thought: bad idea. These retirement plans are usually funded by automatic investment, and in my case, every pay day would generate a transaction fee.
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This would only be a problem if your 401(k) doesn’t allow automatic investments to go into a money market fund. Then, on a quarterly or monthly basis you could take the money out of the money market fund and put into the ETFs.
ETFs are very much like sector mutual funds, but are indeed traded like stocks. They can be shorted. There is a lot about ETFs (as well as other excellent investment information) at http://www.aaii.com. Their latest monthly newsletter had an entire article about ETfs, with historical returns, etc.
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