Todd OHanlon has worked in the management services division of Focus Consultants for the past five years. He currently earns an annual salary of about $120,000. At 33, hes still a bachelor and has accumulated about $100,000 in savings over the past few years. He keeps his savings in a money market account, where it earns about 3 percent interest. Todd wants to get a bigger bang for his buck, so he has considered withdrawing $50,000 from his money market account and investing it in the stock market. He feels that such an investment can easily earn more than 3 percent. Heidi Jackson, a close friend, suggests that he invest in mutual fund shares. Todd has approached you, his broker, for advice.

What special fund features might help Todd achieve his investment objectives? What types of mutual funds or ETFs would you recommend to Todd? What recommendations would you make regarding Todds dilemma about whether to go into stocks, mutual funds, or ETFs? Explain. Explain to Todd the rationale for choosing ETFs over mutual funds.