October 30
Building an Index Leverage for Your Portfolio with the Help of ETFs (Index ETF)
While talking about Index ETF one does talk about the technicalities involved and some of the best performing options available out there but at the same time one cannot miss out comparing Index ETFs with Index Mutual Funds. Most of you traders out there would be investing in Index Mutual Funds or at least will be aware about Index mutual funds. Relatively new instrument which can be compared to mutual funds are Index Exchange Traded Funds. Even though Index mutual funds are definitely a good alternative for smaller portfolio but if the expense ratio and taxes a trader is supposed to pay with Index ETFs are considered then Exchange Traded Funds are seen as a better opportunity for larger portfolio.
With the introduction of Index ETFs the prime reason why traders are more attracted towards these investment instruments is because of the stock like flexibility it provides. Due to its popularity this type of funds not only adds new traders but it also encourages current index mutual fund investors to switch. Since ETFs can be traded on stock exchange during the market hours, investment managers can take index position to capitalize on the situation or limit their risk in bad times.
Some of the most popular Index ETF are:
1.) iShares Russell Midcap Index (IWR): Investments of these funds are more focused on the mid cap stocks listed on Russell. Top holdings are TJX Companies, Avon Products, Precision Castparts Corp., Marsh & McLennan Companies, H.J. Heinz Company etc.
2.) iShares Dow Jones Select Dividend Index (DVY): This fund is a perfect match for the investors that like to invest in dividend paying stocks. Top holdings of these funds are Lorillard Inc., Centurytel Inc., Eastman Chemical Company, VF Corporation Entergy Corporation etc.
3.) iShares S&P 500 Index (IVV): Fund Managers here are focused on investing in good scripts listed on S&P 500. Top Holdings of these funds are ExxonMobile Corporation, Microsoft Corporation, GE, J.P. Morgan Chase, Procter &Gamble Company etc.
May it be Institutional Investors or active hedge fund managers, they all have one thing in common which is they all love Index ETFs. For these investment managers when it comes to increasing their exposure to the broad index or hedge their current positions they go for Index ETF purely because of its convenience.
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