• Advantages of Exchange Traded Funds

    • Diversification: ETF provides proper diversification as it enables the investors to invest in broad market based stocks by buying only one unit of ETF. Investors can also invest in bonds through ETFs which help them to diversify the risk.
    • Tradable: ETFs are traded same as shares and traders can perform short-sell and margin transactions as well.
    • Better Communication: Investors are aware of the daily NAV and the market price of each unit which also provides the information of discount and premium.
    • Easy Holding: Through Commodity ETFs, the investors can hold different precious commodities like gold in electronic form without holding them physically. It removes the storage cost and also makes the investment easy for the investors.
    • Lower Cost: As the ETFs follow the commodities, bonds and stock indexes, they are passively managed by the managers. This results in lower management fees and lower cost for the investors.
    • High Liquidity: ETFs provides high liquidity on the secondary market through the unique creation and redemption process by the management.
    • Tax Benefit: ETFs provide tax benefits to the investors as the profit is not considered as the capital gains tax.
    • Risk Exposure: As the ETFs replicate an index or a commodity or a currency and the futures and options are available for the same, it provides a better risk management technique by proper hedging mechanism.
    • Transparency: As the ETFs follow any bond and stock index portfolios or commodities and their price are available all the time, this is considered to be a very transparent process which attracts more investors to invest in the same.

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