The Basic Advantages Of ETF Trading
If you are a person who has just been introduced to ETF Trading (Exchange-Traded Funds), then this introduction may be helpful. ETF is very complex and there are many moving parts to trading so this is a broad brush stroke of some basic information and the advantages of ETF trading.
The first thing to be aware of with ETF is that when anyone talks about the "history" of ETF, they are not talking about Wall Street. ETF has been around a very short time and actively-managed since 2008. There are some very large financial firms involved in ETF and that is where the history comes in. One can look at the history of a financial firm or company and see how they have done in other areas of stocks and get a fairly good idea of their record of success.
The next important item to know is that this industry is growing like crazy. In 2008 there were 628 ETFs with $562 billion, in August of 2009 there were 858 ETFs with $674 billion. With the growth has come many different types of ETFs that range from minimally risky to very risky.
Among the benefits of ETFs is their likeness to stocks. The difference is that they are usually less expensive and are not actively-managed. Buying and selling of securities to accommodate shareholders does not take place with ETFs. Most ETFs don't have 12b-1 fees. And, there are lower distribution, accounting, and marketing expenses.
ETF trading provides more flexibility in buying and selling than stocks. A trader can buy and sell ETF stocks at any time during a day of trading. They can use limit orders, stop-loss orders, stop orders, etc., just like stocks. A trader can purchase shared on margin then sell short to incorporate hedging strategies effectively.
Just as with mutual funds, ETFs have tax efficiency. There are low capital gains generated due to low turnover in portfolio securities. The trading gives market exposure and an investor has an economical way to balance their portfolio due to the diversity of trading options. One of the greatest advantages of ETF trading is the transparency. Daily transactions are posted on the ETF brokers website each day that gives a detailed analysis of the net asset value and other details regarding trading for the previous day.
The SEC provides an exemption in order for an ETF to be structured. Most are open-end management investment companies just as money market and mutual funds. This gives them greater flexibility in portfolio construction. ETFs participation in lending programs. They also use futures and options to achieve investment objectives. There is a proposal being considered to create an ETF category so that they will no longer need an exemption from the SEC.
An individual considering ETF trading will want to become very knowledgeable in every aspect of trading. By contacting a professional who has expertise in the details and intricacies of ETF trading a person will be able to make the decisions and create a strategy that will help them to be successful in their trading endeavors. - 23208
The first thing to be aware of with ETF is that when anyone talks about the "history" of ETF, they are not talking about Wall Street. ETF has been around a very short time and actively-managed since 2008. There are some very large financial firms involved in ETF and that is where the history comes in. One can look at the history of a financial firm or company and see how they have done in other areas of stocks and get a fairly good idea of their record of success.
The next important item to know is that this industry is growing like crazy. In 2008 there were 628 ETFs with $562 billion, in August of 2009 there were 858 ETFs with $674 billion. With the growth has come many different types of ETFs that range from minimally risky to very risky.
Among the benefits of ETFs is their likeness to stocks. The difference is that they are usually less expensive and are not actively-managed. Buying and selling of securities to accommodate shareholders does not take place with ETFs. Most ETFs don't have 12b-1 fees. And, there are lower distribution, accounting, and marketing expenses.
ETF trading provides more flexibility in buying and selling than stocks. A trader can buy and sell ETF stocks at any time during a day of trading. They can use limit orders, stop-loss orders, stop orders, etc., just like stocks. A trader can purchase shared on margin then sell short to incorporate hedging strategies effectively.
Just as with mutual funds, ETFs have tax efficiency. There are low capital gains generated due to low turnover in portfolio securities. The trading gives market exposure and an investor has an economical way to balance their portfolio due to the diversity of trading options. One of the greatest advantages of ETF trading is the transparency. Daily transactions are posted on the ETF brokers website each day that gives a detailed analysis of the net asset value and other details regarding trading for the previous day.
The SEC provides an exemption in order for an ETF to be structured. Most are open-end management investment companies just as money market and mutual funds. This gives them greater flexibility in portfolio construction. ETFs participation in lending programs. They also use futures and options to achieve investment objectives. There is a proposal being considered to create an ETF category so that they will no longer need an exemption from the SEC.
An individual considering ETF trading will want to become very knowledgeable in every aspect of trading. By contacting a professional who has expertise in the details and intricacies of ETF trading a person will be able to make the decisions and create a strategy that will help them to be successful in their trading endeavors. - 23208
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