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Exchange Traded Funds are portfolios of stocks that replicate the performance of pretty much every imaginable stock index. They offer investors the opportunity to invest in a particular market sector without researching individual stocks.
What are the advantages of Exchange Trade Funds?
Exchange Traded Funds offer advantages over index mutual funds. You can buy and sell ETFs just like stocks, and you pay the same commissions as you would for trading stocks.
Most Exchange Traded Funds require no minimum investment, and there is no required holding period. Unlike mutual funds that trade only once a day, after the market closes, ETFs can be traded at any time during the day. Another advantage is that Exchange Traded Funds can be sold short.
Exchange Traded Funds are an inexpensive way to gain exposure to an index. Investors don't have to pay stamp duty, there are no upfront fees when you invest and annual charges are less than 0.5% - lesser than most index funds or unit trusts. And they are a particularly inexpensive way of investing in foreign markets or in specific sectors or industries. The only other cost is stockbroker's commission - this can work out at less than $10 a deal.
That sounds like a good deal - are there any pitfalls? If you want to put money into an Exchange Traded Funds over a period of time, dealing costs charged by a stockbroker can quickly add up.
More on Exchange Traded Funds:
There are at least four sites offering in-depth information on ETFs: Yahoo Finance, Morningstar, ETF Connect and ETF Zone.
Of the four, Morningstar is the only site that shows you the top 25 holdings of each fund. Yahoo and ETF Connect show the top 10 holdings, while ETF Zone shows only industry sector breakdowns and no individual stock holdings.
Exchange Traded Funds Newsletter:
ETF Global Investor: The ETF Global Investor follows a real-time trading strategy that monitors and evaluates Exchange Traded Funds at all times, and then determines which ones to invest in. That means you don't have to worry about making "educated guesses" when you invest in ETF's ... the system's automatic buy, sell, and hold recommendations tell you exactly what to do.
Seven model portfolios along with over 500 exchange-traded funds (ETFs) ranked at ETFglobalinvestor.com. ETF Global Investor is a simple; low-risk ETF investment system has gained more than 47.61% average annual return over the last 4 years. Start your 30-day trial Subscription today.
See also
What are Exchange Traded Funds?
What is an ETF?
What is an Exchange Traded Fund?
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