Exchange Traded Funds (ETF) in general and the natural gas ETF in particular has become very popular over the last several years. Lets exam why this has happened.

Expenses

When you invest in a mutual fund, you are relying on a team managers and analyst to try and out perform a certain index. All that research and trading will eat into your investment. That cost will be reflected in the expenses charges. It is usually quoted as a percentage of assets.

Since an ETF is trying to match an underlying index, it is passively traded. No research is necessary; all the ETF manager does is purchase the stocks that are in the index. Because of this passive approach, ETF expense fees are often quite lower than those of mutual funds.

Trading

A natural gas ETF (or any ETF for that matter) can be traded like an ordinary stock. You can trade an ETF throughout the day. You can also enter market orders, limit orders and more importantly, stop loss orders. You may also be able to short an ETF and some even have options you can trade.

With a mutual fund, you can only trade at the net asset value that is set at the end of the day when the market closes. This would prevent you from getting out of the trade during the day if, say the market was collapsing and you wanted to get out. In a mutual fund, you would have to wait until 4pm to get out.

These are but a few reasons you should trade an ETF instead of a mutual fund.