October 11
What’s the Buzz About the New Funds Available in the Market? What Are Exchange Traded Funds (ETFs)?
ETFs are securities certificates that give an opportunity to invest in multiple stock certificates only by investing in one fund. It comes into existence with different financial firms coming into being and ETFs price is based on the prevailing prices of underlying assets in the market. The whole management of these kinds of securities is being done by the fund manager.
If you are a trader who is not investing ETFs yet and having a hard time taking that decision, I will talk a bit on why invest in ETFs? If you are thinking why Exchange Traded Funds and why not invest in Mutual Funds instead the answer is: Sure you can buy Mutual Funds directly from a Bank or Financial Institution with no sales charge or “load”. However the annual management fees are typically very high with these traditional mutual funds and also you can buy or sell only at the closing price at the end of the trading session. On the other side if you are looking at ETF Trading it works as a stock you can buy or sell at any time during the trading session at the market price. You pay the brokerage fees just like stocks and other expenses involved with ETFs are lower in comparison to Mutual Funds. If one is looking at expenses involved with taxation, the taxes you pay while trading in ETFs is much lower as well.
Further about the range of available ETFs: There are ETFs available where in a trader can increase their exposure in a particular sector and at the same time keeping away from getting heavily invested in a particular company, one can invest in index funds which closely track the movements in the index and accordingly its price is set, there are ETFs that invests in blue chip companies or mid caps, looking at the market crisis these days international ETFs are also becoming popular where an American citizen can increase their exposure to for example Asian markets or Asian indexes, there are also ETFs where one can invest in precious metals like gold and many more.
So there is a huge list of ETFs available today for you fellow traders and depending upon your portfolio you can invest in the ETF that best suits your requirements.
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