An Exchange-Traded Fund (ETF) can mean referring to a two parties that a company acquires its securities in the primary and secondary market for resale or it can mean a diversified portfolio of investments for example equities or bonds. Besides, ETFs present somewhat better conditions in terms of liquidity and possibility of trading.
Advantages of investing in ETFs
- Intraday trading: While mutual funds are bought and sold after the market closes, the operation of an ETF makes it possible for investors to transact in shares during the course of the day, which is a highly beneficial feature for people who seek flexibility and the ability to alter their investments quickly.
- Transparency: Most of ETFs are required to report the composition of their portfolio on daily basis hence giving the investors full disclosure on the state of the fund and how it chooses to allocate the assets.
- Tax efficiency: It is generally an opinion that ETFs are less costly than actively managed mutual funds since they usually distribute lesser capital gain distributions.
Advanced trading options: This makes it easier for investors to implement specific strategies due to flexibility of the investment vehicle which is traded similar to individual equities. It is not possible with conventional mutual funds as the case may be here.
