Spider Exchange Traded Funds

Investors always look out for innovative investment opportunities.  They want more ease and more convenience in t...

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European Exchange Traded Funds

As investors, you surely have bought and sold stocks in the market and found the process very convenient, quick and has...

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Exchange Traded Funds India

One of the major trends in India’s asset management indIndiatry is the rise, growth and popularity of exchange tr...

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Leveraged ETFs

An exchange traded fund (ETF) is a pool of stocks split into units which can be bought and sold on the exchange just li...

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Exchange Traded Funds

One of the major trends in India’s asset management indIndiatry is the rise, growth and popularity of exchange tr...

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High Dividend ETF

When the economy is doing well, people prefer to invest in growth stocks- stocks which are bound to do very well and wh...

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Growth Stock ETFs

Growth Stocks The definition of a growth stock may change according to changes in market conditions and the economy.&n...

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Ethical ETF

Meaning of ETF (Exchange Traded Fund) An exchange traded fund or ETF is a fund which invests in stocks in a particula...

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ETFs (Exchange Traded Funds) offer investors an undivided interest in the shape of securities and other assets and are identical in many ways to traditional mutual funds, except that shares in an ETF can be sold or purchased at any point of the entire day similar to stocks on a security exchange via a broker-dealer.

There are some advantages and disadvantages that the ETFs offer the individual investor. These include:

Advantages of ETFs

The benefits of ETFs include:

Market Access: ETFs offer investors exceptional exposure to global stock markets, because they span almost all available indexed equity category.

Cost: ETFs are quite inexpensive, great and offer direct access for investors to get exposure to equity markets. ETF investments usually call for minimum transaction costs (without any front-end charges, early squaring penalties or exit charges, and also no high service charges) and are beneficial for tax exemption also.

Flexibility: ETFs offer flexibility for the individual investor. The investor can opt for the choice between direct stock purchasing and diversification via mutual funds. The individual investor can trade in ETFs regularly, and can use ETFs in a variety of different ways.

Tradability/Liquidity: ETFs manifest stock-like features, as they trade all trading day at prices that usually reflect their overall underlying asset value.

Disadvantages of ETFs

While ETFs offer a number of benefits to the investor, but not without any potential disadvantages. These include:

Novelty/Liquidity problems: ETFs are new financial product, particularly for small investors, and has initiated some concerns about their actual liquidity, although some commentators don’t agree with the liquidity concern by pointing to the size of the markets where ETFs are traded. Moreover, there has been some misinformation circulated in the market place concerning ETFs.

The Capability for Tracking Error: It is said that the tracking error with ETFs (the difference of cost between ETF stocks and the virtual cost of the asset/s they manifest) is easy, resulting in possible losses for the individual investor holding ETF shares.

Fund fees: These may be required to pay fund fees which depend on the fund.

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