Basics Of Etf Trading

Exchange Traded Fund (ETF) is an investment fund which is quite similar to the usual stocks

. It is basically a kind of close ended mutual fund. By investing in ETFs investors can earn interests in a number of assets. Quite like the regular stocks, ETFs can be bought and sold all through the day. Investments can be made in the ETF Shares for a longer term for the purpose of the allocation of assets. One can also invest in ETF for the implementation of market timing investment strategies.

All About ETF Trading:

Every ETF comes with a NAV or the Net Asset Value. This NAV is calculated on the Total Market Capitalization of the portfolios products excluding the expenses and is then divided by the total number of shares which the company issues.

The Net Asset Value of ETFs is not calculated daily.

ETFs are closely connected with the market index. These indexes are of two kinds, fundamental and traditional.

Most ETFs have lesser expense ratios as compared to a regular mutual fund.

Individual shares are not sold under ETF. It only issues multiple shares which are together called Creation Units.

An investor, after buying such a Creation Unit can sell these shares individually. Sometimes the investor can even sell individual shares from this Creation Unit back to the ETF.

The costs incurred while dealing with ETFs include the bid cost, expense ratio, discounts and the premium.

A stock sold under the ETF is characterized by a taxable capital loss or gain.

The commission paid while purchasing or buying ETFs is same as that paid on regular stocks.

The ETFs available include Equity ETFs and Gold ETFs.

ETFs have the option of short selling and limited orders just like a regular stock.

All ETFs do not enjoy a good liquidity.

Benefits Of ETF Trading:

ETFs have higher tax efficiency levels

Transactions of ETFs can be carried out all through the day

ETFs provide exposure to a wider market which gives an easy access to broad based indices and industry sector specific indices

ETF deals have to be made very carefully and after properly analyzing the current market scenario. It is better to go for professional assistance rather than invest money at a wrong place and then blame the stock market. And for accurate predictions and regular updates on Stock Market Investments, one can subscribe Investment Newsletter from Moneemouse.com. Before investing in the ETFs or any other Stock Market funds, one can visit http://www.moneemouse.com/ to eventually make smart investment decisions.

by: Hamsini Muralidharan

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