Exchange Traded Funds are those funds which study indexes like Dow Jones , S&P 500 etc. If one does purchase these shares of the ETF (ETF’s) then one is technically purchasing shares of certain portfolio which monitors yields on the mother index and its returns.
All About ETF or ETF’s
The main point of difference between Exchange Traded funds and different indexed funds are that ETF (ETF’s) focus on replicating performance and don’t make the effort to outdo their close competition. An ETF (ETF’s) doesn’t play down the market but creates a market of its own.
Who uses it?
ETF (ETF’s) rose to popularity as another option to Mutual funds. Investors inclusive of individual and institutional ones play with ETF (ETF’s).
ETF plus points
With ETF (ETF’s) one can mix and merge the simplicity of a variety of portfolios with a simple stock for trading. Investors have a chance to purchase such ETF (ETF’s) shares and hold on to them in the long run.
– Diversification: ETF (ETF’s) allows one to keep track of more stocks and it even gives more exposure to one of the different styles and equity segments.
-Much lowers fees when pitted against Mutual Funds: ETF (ETF’s) have much lower ratios of expense. Mutual funds have a much high ratio because they include management fees and other services like marketing fees amongst many others.
– One can reinvest dividend almost immediately: The company dividends in an ETF (ETF’s) open-ended can be reinvested almost immediately. These timings generally are dependent on the mutual fund index.
-ETF (ETF’s) have a higher tax efficiency when compared to Mutual Funds: This is simply because capital gains tax is entirely up to the concerned investor. It is mostly paid when the sale occurs.
– Premium Price: ETF (ETF’s) trade when the markets open and there is a slim chance of having a fluctuating ETF (ETF’s) price. Arbitrage ensures that the price is back in its true line.
By keeping an ETF (ETF’s) one enjoys the index fund diversification can sell short and purchase on margin. ETF (ETF’s) give investors a chance to enjoy buying and selling opportunities. There has been a surge in the popularity of these funds in the past couple of years.
The liquidity and low fees are benefits which mustn’t be missed. However a fair share of misinformation of ETF (ETF’s) also does the rounds. These funds in fact has some limitations as well. Since there are liquid they encourage short term trades and for some investors that might not be viable.
1.ETF (ETF’s) help investors gain exposure of certain sectors
2. In comparison to mutual funds , ETF (ETF’s) have many more Benefits.
3. ETF (ETF’s) have certain tax implications and due consideration must be given when choosing a an ETF (ETF’s) best suited for you. Thanks for watching. Please help us grow.