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Exchange Traded fund is an investment instrument which is a good mix of mutual fund as well as the securities. The benefits of using ETF are listed below.

1. Mixed Portfolio: ETF provides the option to the investor to invest in range of stocks with the diversified investment it reduces the risk appetite of the investor.    Range of stocks is always better than any one particular stocks. The fund management cost in any fund includes the various costs like legal expenses, custodial services, accounting and auditing charges. Returns have been marginally better in case of a portfolio with investment in varied number of funds rather than in one single stock.

2. Less cost: Expense ratio is the cost borne by a mutual fund company to run the fund. The biggest part of the expense is the fund operating expense which is paid to the fund manger. The huge cost of the fund is the cost of the fund manger who manages the fund.

3. Tax efficiency: The tax benefit can be availed by the investor by investing in mutual fund through ETF fund. ETF Trading can be used as a short and long term investor tool to have diversified portfolio and low expense ratio.

The services of ETF trading.

1. You can get the get the benefit from ETF only if you use it very systematically in proper way. At the closing of the business the cost of the mutual funds is announced. All purchasing done gets the same price on the same day.

2. ETF can be also traded by the investor for trade on margins and short selling of the stocks. Investors can trade for short term through ETF trading.

3. ETF equity can be sold and bought through options like trade on margin and short selling strategies.

4. Low turnover and broad fund diversification are associated with index funds.

ETF is good instrument to keep a regular watch of industrial performance, investment pattern, fixed income, global investment, trading in commodities and currencies. People can buy as low as one stock with the help of ETF. It is as good as trading equity in the open market. ETF is managed by the fund managers and it can be traded in market. An investor looking for an opportunity for buying ETF can easily do so by choosing between different kinds of stocks like equities, foreign stocks , fixed income and alternative income. It is essential to examine the long term goal before you select the ETF. The return and risk factors remains the same as any other investment option.

 

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