What Are ETFs?
ETFs stand for Exchange Traded Funds. Ever thought of trading ETFs? ETFs represent an ownership stake in a basket of underlying securities or assets. This basket can represent a specific index like the S&P 500 or the Nasdaq 100. It can also be a sector like semiconductor, energy or travel. It could be a segment of market like the small cap or large growth stocks. There are even ETFs on foreign currencies like Euro, Yen, and USD.
It can also comprise of bonds, gold, silver or other commodities. The value of the ETF is determined by the underlying securities. So you may be thinking this sound like a mutual fund.
ETFs can be brought and sold throughout the trading day like ordinary stocks. ETFs are different from the Mutual Funds in a number of ways. The unit price of ETF changes instantaneously unlike the Mutual Funds that are priced at the end of the trading day.
ETFs can be shorted, traded with a margin account and many trade options. ETFs can be traded using the market, limit and stop loss orders. There is no minimum for ETF purchases. So ETFs offer the diversification advantages of mutual funds and the flexibility of stocks.
Suppose you have a bullish opinion on the oil sector. You will have to analyze dozens of companies in the oil sector and spend hours to select the one that you think is the strongest. One of the main advantages of ETFs is that they offer diversification.
ETFs provide you the benefit of diversification in the same way that mutual funds do to the small retail investors. You could choose the Oil Sector ETFs that would give you the advantage of mimicking some oil sector index. Instead of investing in a few stocks you have now invested in a particular sector just like investing in a mutual fund.
The key advantage that ETFs hold over mutual funds is that they can be sold or bought at anytime of the trading day. ETF prices keep on changing in relation to the underlying assets. However, mutual funds are priced only once at the end of each trading day and their NAV does not change throughout the next trading day.
A mutual fund charges management fees. It can also charge upfront, backend or other sales loads. Expense ratios for ETFs on average are not more than 0.4%. Some have even expense rations as low as 0.07%. This is the main advantage of ETFs over mutual funds. It is the fees charged by each. ETF expenses are low because they are passively managed and generally follow an established index.
Currency trading has become extremely popular among the institutional investors, big companies and hedge funds. Foreign currency trading is not just for gamblers or commodity traders.
Foreign currency has become a respected asset classification. It is so hot that now you can trade Exchange Traded Funds (ETFs) on currencies. If you want to hedge or speculate that the U.S. dollar is strengthening or weakening against major foreign currencies and like the idea and concept of ETFs, now there is a pretty good inventory of product to choose from. As with any other product there are advantages and disadvantages of trading ETFs so you need to do your due diligence before making any investment decision. - 23222
It can also comprise of bonds, gold, silver or other commodities. The value of the ETF is determined by the underlying securities. So you may be thinking this sound like a mutual fund.
ETFs can be brought and sold throughout the trading day like ordinary stocks. ETFs are different from the Mutual Funds in a number of ways. The unit price of ETF changes instantaneously unlike the Mutual Funds that are priced at the end of the trading day.
ETFs can be shorted, traded with a margin account and many trade options. ETFs can be traded using the market, limit and stop loss orders. There is no minimum for ETF purchases. So ETFs offer the diversification advantages of mutual funds and the flexibility of stocks.
Suppose you have a bullish opinion on the oil sector. You will have to analyze dozens of companies in the oil sector and spend hours to select the one that you think is the strongest. One of the main advantages of ETFs is that they offer diversification.
ETFs provide you the benefit of diversification in the same way that mutual funds do to the small retail investors. You could choose the Oil Sector ETFs that would give you the advantage of mimicking some oil sector index. Instead of investing in a few stocks you have now invested in a particular sector just like investing in a mutual fund.
The key advantage that ETFs hold over mutual funds is that they can be sold or bought at anytime of the trading day. ETF prices keep on changing in relation to the underlying assets. However, mutual funds are priced only once at the end of each trading day and their NAV does not change throughout the next trading day.
A mutual fund charges management fees. It can also charge upfront, backend or other sales loads. Expense ratios for ETFs on average are not more than 0.4%. Some have even expense rations as low as 0.07%. This is the main advantage of ETFs over mutual funds. It is the fees charged by each. ETF expenses are low because they are passively managed and generally follow an established index.
Currency trading has become extremely popular among the institutional investors, big companies and hedge funds. Foreign currency trading is not just for gamblers or commodity traders.
Foreign currency has become a respected asset classification. It is so hot that now you can trade Exchange Traded Funds (ETFs) on currencies. If you want to hedge or speculate that the U.S. dollar is strengthening or weakening against major foreign currencies and like the idea and concept of ETFs, now there is a pretty good inventory of product to choose from. As with any other product there are advantages and disadvantages of trading ETFs so you need to do your due diligence before making any investment decision. - 23222
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and forex. Understand The Forex Market. Learn Forex Trading!
posted by X - Men @ 2:48 AM
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