Exchange traded funds (ETFs) provide exposure to a basket of shares that track a stock market index. ETFs trade like shares on an exchange, offering the diversification of a fund at lower costs than actively managed funds. They are a cost effective way to gain exposure to an index, sector, or asset class.
Exchange Traded Funds (ETFs) are baskets of securities that track an index and trade on a stock exchange. The first ETF was launched in the US in 1993, while the first Indian ETF, Nifty BeES, was launched in 2002. ETFs offer diversification and lower costs than traditional index funds. ETFs can be bought and sold throughout the trading day like stocks. They have lower tracking errors than index funds due to arbitrage opportunities. ETFs represent their underlying assets accurately through arbitrage between their price and net asset value.
ETFs are mutual funds that trade like stocks on an exchange. ETFs provide diversified exposure to various asset classes like equity, fixed income and commodities at a low cost. In India, gold and Nifty ETFs are popular. Gold ETFs provide a convenient way to invest in physical gold without the hassles of storage. Nifty ETFs allow investors easy access to the Indian stock market at low costs. ETFs offer benefits like transparency, flexibility and ability to track investments in real time.
This Presentation is about the Financial Market in India.
Aim is to provide basic information regarding Stock market, Bombay Stock Exchange(BSE) and National Stock Exchange of India (NSEI).
The document discusses stock exchanges, including what they are, their functions, types of members (brokers and jobbers), and speculation. It provides definitions and examples of key stock exchange terms. It also lists some of the largest stock exchanges in the world and in India, highlighting features of important Indian exchanges like the National Stock Exchange and Over-The-Counter Exchange of India.
An exchange-traded fund (ETF) is an investment fund that tracks an index, sector, commodity or asset. It trades like a stock on an exchange and allows investors to gain exposure to a basket of equities with instant diversification at low cost. ETFs offer benefits like lower operating costs than mutual funds, flexible trading, transparency, and tax efficiency. They provide a simple way to invest in an entire market segment with characteristics like tax efficiency, low expense ratios, and continuous pricing throughout the day.
The document provides an overview of exchange traded funds (ETFs). It discusses what ETFs are, how they work, their fees and costs, how to invest in ETFs through placing market orders or limit orders, and their benefits compared to traditional managed index funds. ETFs offer investors a way to access a diversified portfolio through a single exchange-traded security and provide the benefits of indexing such as low costs, diversification and tax efficiency.
This document discusses the sources of liquidity for exchange-traded funds (ETFs). It notes that while ETF trading volume provides a measure of popularity, true liquidity depends on the liquidity of the underlying basket of stocks. Primary sources of ETF liquidity are creation/redemption of units by authorized participants and market making activities. These allow ETF units to be bought and sold without relying solely on trading volumes. The document concludes that investing in ETFs provides liquidity through both secondary market trading and the unit creation/redemption process.
Exchange Traded Funds (ETFs) are baskets of securities that track an index and trade on a stock exchange. The first ETF was launched in the US in 1993, while the first Indian ETF, Nifty BeES, was launched in 2002. ETFs offer diversification and lower costs than traditional index funds. ETFs can be bought and sold throughout the trading day like stocks. They have lower tracking errors than index funds due to arbitrage opportunities. ETFs represent their underlying assets accurately through arbitrage between their price and net asset value.
ETFs are mutual funds that trade like stocks on an exchange. ETFs provide diversified exposure to various asset classes like equity, fixed income and commodities at a low cost. In India, gold and Nifty ETFs are popular. Gold ETFs provide a convenient way to invest in physical gold without the hassles of storage. Nifty ETFs allow investors easy access to the Indian stock market at low costs. ETFs offer benefits like transparency, flexibility and ability to track investments in real time.
This Presentation is about the Financial Market in India.
Aim is to provide basic information regarding Stock market, Bombay Stock Exchange(BSE) and National Stock Exchange of India (NSEI).
The document discusses stock exchanges, including what they are, their functions, types of members (brokers and jobbers), and speculation. It provides definitions and examples of key stock exchange terms. It also lists some of the largest stock exchanges in the world and in India, highlighting features of important Indian exchanges like the National Stock Exchange and Over-The-Counter Exchange of India.
An exchange-traded fund (ETF) is an investment fund that tracks an index, sector, commodity or asset. It trades like a stock on an exchange and allows investors to gain exposure to a basket of equities with instant diversification at low cost. ETFs offer benefits like lower operating costs than mutual funds, flexible trading, transparency, and tax efficiency. They provide a simple way to invest in an entire market segment with characteristics like tax efficiency, low expense ratios, and continuous pricing throughout the day.
The document provides an overview of exchange traded funds (ETFs). It discusses what ETFs are, how they work, their fees and costs, how to invest in ETFs through placing market orders or limit orders, and their benefits compared to traditional managed index funds. ETFs offer investors a way to access a diversified portfolio through a single exchange-traded security and provide the benefits of indexing such as low costs, diversification and tax efficiency.
This document discusses the sources of liquidity for exchange-traded funds (ETFs). It notes that while ETF trading volume provides a measure of popularity, true liquidity depends on the liquidity of the underlying basket of stocks. Primary sources of ETF liquidity are creation/redemption of units by authorized participants and market making activities. These allow ETF units to be bought and sold without relying solely on trading volumes. The document concludes that investing in ETFs provides liquidity through both secondary market trading and the unit creation/redemption process.
Investors trading for a long time earlier had limited markets to invest their funds. There were forex, stock, commodities, and precious metals that ruled the financial markets. But as technology and advancements hit the world, there were several new possibilities were added to it. Cryptocurrencies, index funds, contracts of difference, exchange-traded funds, etc.
The article will help readers and traders explore the two passive financial market investments. Index funds and ETFs are frequently traded instruments of the market due to their good market returns and popularity among investors. Index funds vs ETFs give an overview of the trading instruments and what similarities and differences they share for investors to know.
Exchange Traded Funds- A route to efficient investingAmar Ranu
1) Exchange traded funds (ETFs) provide a low-cost and tax-efficient way for investors to gain exposure to stock indices or sectors.
2) ETFs have grown tremendously in popularity globally and in India in recent decades. Global ETF assets have grown from $463 million in 1993 to over $1 trillion in 2010.
3) For financial planners, ETFs provide an opportunity to help clients invest more efficiently with small amounts of money and achieve diversification. ETFs allow comprehensive financial planning services for retail investors.
Exchange traded funds (ETFs) are investment vehicles that track an index or basket of assets like stocks or commodities. ETFs trade on stock exchanges similar to stocks. They allow investors indirect ownership in the underlying assets by purchasing shares in the ETF. ETFs track indexes closely and provide opportunities for diversified, low-cost exposure to markets or sectors similar to index mutual funds but with intraday tradability like stocks. While ETFs and mutual funds have similarities, ETFs trade continuously at market prices close to the net asset value of their holdings, unlike closed-end mutual funds which may trade at premiums or discounts to net asset value.
ETFs are growing in popularity due to their low costs, broad diversification, and ability to be traded like stocks. ETFs track indexes like mutual funds but trade continuously throughout the day instead of just at the end of the day. The pros of ETFs include tax efficiency, lower fees, flexible trading, and a wide variety of asset classes. However, the cons include occasional unwanted distributions, brokerage fees, bid-ask spread issues, liquidity concerns for less traded ETFs, and potential tracking error versus the underlying indexes.
An exchange traded fund (ETF) is a security that tracks an index, commodity, or basket of assets and trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold, unlike mutual funds which are priced at the end of the trading day. ETFs offer benefits over mutual funds such as lower costs, tax benefits, and transparency since their portfolios are disclosed daily or in real-time. ETFs can be traded on an exchange throughout the day like stocks at prices close to their net asset value, providing simplicity and liquidity.
How to use ETFs in your futures trading strategy.pdfSarah Rayan
Futures trading and exchange-traded funds (ETFs) are two popular investment vehicles that can be used in conjunction to create a well-rounded trading strategy. By understanding the benefits and drawbacks of each, traders can make informed decisions on how to use ETFs in their futures trading strategy.
Exchange traded funds (ETFs) are investment funds traded on stock exchanges like stocks. Most ETFs track an index such as a stock or bond index, holding assets like stocks, commodities, or bonds. ETFs may be attractive investments due to their low costs, tax efficiency, and stock-like features. While ETFs provide diversification and flexibility by being traded throughout the day, they also track narrow markets which can be volatile and lack long term track records.
Does the ETF Industry alter the Volatility of the Underlying Securities? The ...Andrea Bullani
As Market Microstructure project, I wanted to analyze the magnitude of the impact of both the ownership and the rebalancing effect on the volatility of the underlying securities in the italian market. Taking into account the difference in the replication method of the instruments, I surprisingly found out that there is a negative relationship between the volatility of the single FTSEMIB components and the inception date in which the product was launched.
Major users of ETFs are roughly split between institutional and retail investors, though institutional investors dominated initially. In Asia, 80% of ETF shares are held by institutions while only 20% by retail. A fund manager would market to each group differently, using dedicated channels for institutions while positioning ETFs as low-cost, high-liquidity products for retail. When first launching ETFs, Vanguard should consider them as share classes of existing funds to leverage its proven track record, achieve cost advantages, and quickly reach scale due to synergies with cash flows into conventional shares.
ETFs can provide a balanced, low-risk investment option that has stability from blue chip stocks. ETFs offer investors flexibility to buy and sell throughout the day, along with tax advantages and low fees. ETFs have grown rapidly in the past 10 years and now dominate the market, appealing to first-time investors with their low costs and ability to purchase immediately. While ETFs were initially based on indexes, they now allow for tailored investments according to an investor's risk tolerance. Their popularity continues to rise due to low costs, tax efficiency, and stock-like trading features.
Exchange Traded Funds (ETFs) are a hybrid product that combines aspects of stocks and mutual funds. Like stocks, ETFs trade on exchanges throughout the day, while like mutual funds, they comprise a basket of underlying holdings like an index or commodity. ETFs offer investors minimum investment amounts, low costs, and the ability to gain instant exposure to markets or sectors. However, ETFs remain unpopular in India due to a lack of understanding about ETFs, fewer product options compared to other countries, and an inability to automatically reinvest dividends.
The document provides information about Team DELTA, which is the creative team behind the magazine DELTA. It lists the director, faculty-in-charge, faculty advisor and chief student editor. It then provides a table of contents showing the various topics that will be covered in the issue. These include articles on the Indian economy, social media, growth story, leadership and more. It introduces the new issue and hopes that readers will enjoy learning from it.
The document provides an overview of exchange traded funds (ETFs) and exchange traded products (ETPs), identifying key benefits of ETFs compared to mutual funds and analyzing common myths about ETFs. Some of the main benefits highlighted include enhanced liquidity, transparency, lower costs, and the ability to trade throughout the day. The document then addresses 10 common myths about ETFs, such as that trading premiums/discounts are a shortcoming, securities lending poses unique risks, and ETF flows reduce price discovery. For each myth, the document provides the counterargument and reality. In conclusion, the document argues that while not perfect, ETFs have significantly benefited investors and markets by increasing transparency, accessibility, and stability
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. ETFs are the most popular type of exchange-traded product.
An ETF combines the valuation feature of a mutual fund or stock, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be ETFs, even though they are funds and are traded on an exchange.
Only authorized participants, which are large broker-dealers that have entered into agreements with the ETF's distributor, actually buy or sell shares of an ETF directly from or to the ETF, and then only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long-term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets. Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market
This paper examines how exchange-traded funds (ETFs) are altering retirement planning by offering lower fees, greater diversification, and higher liquidity compared to mutual funds. ETFs have experienced exponential growth in assets and availability due to these benefits. While ETFs provide intraday trading, investors must be aware of potential liquidity issues with less popular funds. Overall, the paper argues that ETFs' advantages over mutual funds mean they will increasingly become the preferred investment vehicle for portfolio managers and retirement planning.
1) The document summarizes the history and evolution of index investing and ETFs, from their origins in Burton Malkiel's advocacy for a passive index fund to their current widespread use.
2) It describes how index providers have developed increasingly specialized indexes and methodologies, such as those based on fundamentals, in order to partner with ETF providers and profit from asset gathering.
3) The document cautions that certain types of ETFs, like leveraged, inverse, and futures-based products, are generally poor long-term investments due to structural issues like compounding effects and contango.
ETFs have become increasingly popular among investors due to their low costs, diversification benefits, liquidity, and flexibility. However, investors should carefully consider their investment objectives, risk tolerance, and research the specific ETFs they are interested in before investing.
For more details, please visit: https://www.bajajfinserv.in/exchange-traded-fund
ETF stands for exchange-traded fund. ETFs allow investors to easily buy a basket of various assets like an entire stock market index or sector in a single transaction. ETFs can track stock indexes, bonds, commodities, or other assets. They provide exposure to a wide range of markets while spreading out risk across multiple holdings. ETFs typically have lower expense ratios than mutual funds.
This document provides an overview of exchange traded funds (ETFs) from Evercore Pan-Asset Capital Management. It defines ETFs as investment vehicles that track asset class indexes and generate returns similar to the underlying index. The document discusses the different types of ETFs, how they track indexes, their advantages, factors in selecting ETFs such as tracking performance and costs, and risks associated with ETFs like counterparty risk.
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The article will help readers and traders explore the two passive financial market investments. Index funds and ETFs are frequently traded instruments of the market due to their good market returns and popularity among investors. Index funds vs ETFs give an overview of the trading instruments and what similarities and differences they share for investors to know.
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1) Exchange traded funds (ETFs) provide a low-cost and tax-efficient way for investors to gain exposure to stock indices or sectors.
2) ETFs have grown tremendously in popularity globally and in India in recent decades. Global ETF assets have grown from $463 million in 1993 to over $1 trillion in 2010.
3) For financial planners, ETFs provide an opportunity to help clients invest more efficiently with small amounts of money and achieve diversification. ETFs allow comprehensive financial planning services for retail investors.
Exchange traded funds (ETFs) are investment vehicles that track an index or basket of assets like stocks or commodities. ETFs trade on stock exchanges similar to stocks. They allow investors indirect ownership in the underlying assets by purchasing shares in the ETF. ETFs track indexes closely and provide opportunities for diversified, low-cost exposure to markets or sectors similar to index mutual funds but with intraday tradability like stocks. While ETFs and mutual funds have similarities, ETFs trade continuously at market prices close to the net asset value of their holdings, unlike closed-end mutual funds which may trade at premiums or discounts to net asset value.
ETFs are growing in popularity due to their low costs, broad diversification, and ability to be traded like stocks. ETFs track indexes like mutual funds but trade continuously throughout the day instead of just at the end of the day. The pros of ETFs include tax efficiency, lower fees, flexible trading, and a wide variety of asset classes. However, the cons include occasional unwanted distributions, brokerage fees, bid-ask spread issues, liquidity concerns for less traded ETFs, and potential tracking error versus the underlying indexes.
An exchange traded fund (ETF) is a security that tracks an index, commodity, or basket of assets and trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold, unlike mutual funds which are priced at the end of the trading day. ETFs offer benefits over mutual funds such as lower costs, tax benefits, and transparency since their portfolios are disclosed daily or in real-time. ETFs can be traded on an exchange throughout the day like stocks at prices close to their net asset value, providing simplicity and liquidity.
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Futures trading and exchange-traded funds (ETFs) are two popular investment vehicles that can be used in conjunction to create a well-rounded trading strategy. By understanding the benefits and drawbacks of each, traders can make informed decisions on how to use ETFs in their futures trading strategy.
Exchange traded funds (ETFs) are investment funds traded on stock exchanges like stocks. Most ETFs track an index such as a stock or bond index, holding assets like stocks, commodities, or bonds. ETFs may be attractive investments due to their low costs, tax efficiency, and stock-like features. While ETFs provide diversification and flexibility by being traded throughout the day, they also track narrow markets which can be volatile and lack long term track records.
Does the ETF Industry alter the Volatility of the Underlying Securities? The ...Andrea Bullani
As Market Microstructure project, I wanted to analyze the magnitude of the impact of both the ownership and the rebalancing effect on the volatility of the underlying securities in the italian market. Taking into account the difference in the replication method of the instruments, I surprisingly found out that there is a negative relationship between the volatility of the single FTSEMIB components and the inception date in which the product was launched.
Major users of ETFs are roughly split between institutional and retail investors, though institutional investors dominated initially. In Asia, 80% of ETF shares are held by institutions while only 20% by retail. A fund manager would market to each group differently, using dedicated channels for institutions while positioning ETFs as low-cost, high-liquidity products for retail. When first launching ETFs, Vanguard should consider them as share classes of existing funds to leverage its proven track record, achieve cost advantages, and quickly reach scale due to synergies with cash flows into conventional shares.
ETFs can provide a balanced, low-risk investment option that has stability from blue chip stocks. ETFs offer investors flexibility to buy and sell throughout the day, along with tax advantages and low fees. ETFs have grown rapidly in the past 10 years and now dominate the market, appealing to first-time investors with their low costs and ability to purchase immediately. While ETFs were initially based on indexes, they now allow for tailored investments according to an investor's risk tolerance. Their popularity continues to rise due to low costs, tax efficiency, and stock-like trading features.
Exchange Traded Funds (ETFs) are a hybrid product that combines aspects of stocks and mutual funds. Like stocks, ETFs trade on exchanges throughout the day, while like mutual funds, they comprise a basket of underlying holdings like an index or commodity. ETFs offer investors minimum investment amounts, low costs, and the ability to gain instant exposure to markets or sectors. However, ETFs remain unpopular in India due to a lack of understanding about ETFs, fewer product options compared to other countries, and an inability to automatically reinvest dividends.
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The document provides an overview of exchange traded funds (ETFs) and exchange traded products (ETPs), identifying key benefits of ETFs compared to mutual funds and analyzing common myths about ETFs. Some of the main benefits highlighted include enhanced liquidity, transparency, lower costs, and the ability to trade throughout the day. The document then addresses 10 common myths about ETFs, such as that trading premiums/discounts are a shortcoming, securities lending poses unique risks, and ETF flows reduce price discovery. For each myth, the document provides the counterargument and reality. In conclusion, the document argues that while not perfect, ETFs have significantly benefited investors and markets by increasing transparency, accessibility, and stability
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. ETFs are the most popular type of exchange-traded product.
An ETF combines the valuation feature of a mutual fund or stock, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be ETFs, even though they are funds and are traded on an exchange.
Only authorized participants, which are large broker-dealers that have entered into agreements with the ETF's distributor, actually buy or sell shares of an ETF directly from or to the ETF, and then only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long-term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets. Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market
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2) It describes how index providers have developed increasingly specialized indexes and methodologies, such as those based on fundamentals, in order to partner with ETF providers and profit from asset gathering.
3) The document cautions that certain types of ETFs, like leveraged, inverse, and futures-based products, are generally poor long-term investments due to structural issues like compounding effects and contango.
ETFs have become increasingly popular among investors due to their low costs, diversification benefits, liquidity, and flexibility. However, investors should carefully consider their investment objectives, risk tolerance, and research the specific ETFs they are interested in before investing.
For more details, please visit: https://www.bajajfinserv.in/exchange-traded-fund
ETF stands for exchange-traded fund. ETFs allow investors to easily buy a basket of various assets like an entire stock market index or sector in a single transaction. ETFs can track stock indexes, bonds, commodities, or other assets. They provide exposure to a wide range of markets while spreading out risk across multiple holdings. ETFs typically have lower expense ratios than mutual funds.
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1. MASTERCLASS
EXCHANGE TRADED FUNDS
Sunday, 28 March 2010
2. 1) WHAT ARE EXCHANGE TRADED FUNDS (ETFs)?
At their most basic level, Exchange Traded Funds, or
ETFs are a basket of shares that make up a particular
stock market index, such as the FTSE 100 or Dow Jones.
So, for example you could buy a Dow Jones ETF which
will give you exposure to all the shares that comprise
the Dow Jones Index. Or you could buy a Commodities
ETF that gives you exposure to all the shares in an index
that tracks the commodities sector.
It is therefore an easy and cost effective way of getting
exposure to a particular sector of the market, whether it
is a country or an industry.
1 basket of shares = 1 ETF
1 ETF = 1 share
Sunday, 28 March 2010
3. 2) HOW DO THEY WORK?
If you like they are a cross between a fund and a share.
Like a hybrid rose, they offer the best parts of two
different species. Each ETF holds lots of different shares
(like a fund) but it trades like a share and so can be
bought and sold on the stock market at any point in the
day in exactly the same way as other shares.
The price of an ETF is determined by forces of supply
and demand and although occasionally their price may
move above or below the current price, there is a
mechanism that generally prevents the funds from
trading at prices way above or below their market value
for a sustained period of times.
You cannot sell the underlying shares contained in the
ETF fund.
Sunday, 28 March 2010
4. 3) HOW CAN YOU MAKE MONEY OUT OF ETFs?
This is based on the same principle as any investment -
you buy at a certain price in the expectation it will rise
in the future. So if you think the UK Dow Jones is
going to rise then you buy the Dow Jones ETF and
wait for the price to go up. In addition, the ETF pays all
the dividends from the Index stocks and twice a year.
You can also buy ETFs to protect your portfolio as, like
shares, you can use options (perhaps another
Masterclass!) to profit from a falling market.
However, most private investors use them to access
markets they feel are going to rise in the medium to
long term, but are otherwise difficult and/or costly to
access.
Sunday, 28 March 2010
5. 4) ARE THEY EXPENSIVE?
In terms of buying and holding they are much cheaper
than a fund as they don’t need a fund manager to
actively manage them. They simply replicate the basket
of shares in a particular index.
If you are holding them for the long term then they
will work out cheaper than a fund or even a tracker
fund. However, if you bought and sold on a frequent
basis then the dealing charges could easily mount up.
Typical costs will be trading costs of approximately £7-
£15. There is no initial charge and annual management
charges are around the 0.2%-0.5% level, as opposed to
1% for a tracker fund and 3%-5% for an actively
managed fund.
Sunday, 28 March 2010
6. 5) HOW DO THEY DIFFER FROM TRACKER FUNDS?
They essentially do the same job - in that both
tracker funds and ETFs track a particular index
or combination of indices, i.e. as they contain
the same shares as the index they will mirror
the rises - and falls - of an index.
However, as a tracker fund has associated fund
management costs, albeit less so than an actively
managed fund, an ETF can therefore be a
cheaper and more flexible option as outlined on
slide 5.
Sunday, 28 March 2010
7. 6) ARE THEY RISKY?
As with any choice you need to balance your investments with
the level of risk you are comfortable with. So if you are want to
invest in a particular market sector such as telecommunications
or media, then an ETF is a good way to do this as it offsets the
risk of buying a single stock or company in that sector. They are
also very transparent and investors can monitor the ETF and
its underlying shares online on a daily basis.
However, one risk is that their flexibility may tempt some
investors to trade more frequently than they would normally
do with a more restrictive investment vehicle.
Frequent dealing means you are open to increasing costs as
well as altering the make up of your portfolio more than you
anticipate.
Also, like any investment there is also a currency risk. So if you
opt for an exotic ETF then remember to factor in the effect of
the underlying currency.
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8. 8) HOW CAN I INCORPORATE THEM INTO MY INVESTMENT PLAN
Think of it as mixing the ingredients for a cake! You may
wish to reduce the sugar or add chocolate in order to
change the taste.
ETFs offer similar possibilities for your portfolio. Their
flexibility means they are ideal for diversifying or altering the
style of your portfolio. For example, as you can easily get
access to the performance of an entire index or asset class
through one ETF you may wish to hold a basket of blue chip
UK stocks via an FTSE 100 ETF in order to tilt your
portfolio towards large cap UK companies. Or you may like
to add a bit of excitement to an otherwise conservative
portfolio by buying a commodities ETF.
In addition, ETFs allow you to access a basket of shares in
emerging market countries where you would normally find it
difficult to access investment opportunities.
Sunday, 28 March 2010
9. 9) HOW CAN I BUY ETFs AND WHERE CAN I FIND THEM?
You can only buy ETFs via a stockbroker or independent
financial adviser. You can find them listed on major
stock markets and share trading sites. They either have
the letters ETF at the end or they may have branded
names such as iShares.
As well as being listed on major stockmarkets, many
ETFs are listed in offshore financial centres. For
example, iShares (formerly Barclays and now owned by
BlackRock) are domiciled in Dublin. So if you are a non-
resident you can take advantage of any tax advantages
afforded by the offshore fund regime.
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10. TO SUMMARISE
- ETFs are a cross between a fund and a share
- They offer diversification through exposure to a basket of shares
- They are cost effective
- They are cheaper than managed funds
- They are transparent
Sunday, 28 March 2010