3 Things You Should Know About Exchange Traded Funds - ETFs
If you want to understand how to use ETFs, spend less time on trading and generate the returns you want there are three things you need to know. How ETFs trade, the cost of trading in them, and their benefits. This article will cover those points and show you why you want to make them part of your stock market strategy.
Trade Like Stocks
ETFs allow you to indirectly invest in the stocks that make up a known index, such as the S & P 500. The ETF chart ends up have the same shape as the chart of the index.
Each ETF has its own ticker symbol and expense ratio. And like any stock you trade in the ETF the same way you do a stock. It can be used for day trading, swing trading or even held for long term. Unlike mutual funds you can trade an ETF throughout the day without incurring financial penalties. And the nice thing about them is that they are priced by the market not their net asset value.
Inexpensive
The trading restrictions of mutual funds cost you money by forcing you to hold them for a set amount of time if you do not want to pay a penalty. With an ETF you can do what you want when you want. You decide when to buy, sell or hold. Additionally there is a lower cost associated with the expense ratio. The expense ratio expresses the operating costs and management fees as a percentage of the net assets of the fund over a stated amount of time.
Keep in mind that expense ratios do not include brokerage costs and various other transaction costs. So whereas a mutual fund charges 1-3 percent, ETFs charge .1 to 1 percent.
Advantages
Just like mutual funds ETFs follow an index. Currently ETFs have gone beyond just mirroring an index such as the S & P 500 and know follow different industry groups and sectors. The advantage of dealing with an ETF is that; you do not have to open multiple accounts they tend to have lower tax liability you do not have to deal with the individual contract details of each stock.
This article has shown the attraction of trading in ETFs. You've learned how they are traded, their costs, and their benefits. Now is the time to take advantage of that and consider making them part of your overall stock market strategy. - 23305
Trade Like Stocks
ETFs allow you to indirectly invest in the stocks that make up a known index, such as the S & P 500. The ETF chart ends up have the same shape as the chart of the index.
Each ETF has its own ticker symbol and expense ratio. And like any stock you trade in the ETF the same way you do a stock. It can be used for day trading, swing trading or even held for long term. Unlike mutual funds you can trade an ETF throughout the day without incurring financial penalties. And the nice thing about them is that they are priced by the market not their net asset value.
Inexpensive
The trading restrictions of mutual funds cost you money by forcing you to hold them for a set amount of time if you do not want to pay a penalty. With an ETF you can do what you want when you want. You decide when to buy, sell or hold. Additionally there is a lower cost associated with the expense ratio. The expense ratio expresses the operating costs and management fees as a percentage of the net assets of the fund over a stated amount of time.
Keep in mind that expense ratios do not include brokerage costs and various other transaction costs. So whereas a mutual fund charges 1-3 percent, ETFs charge .1 to 1 percent.
Advantages
Just like mutual funds ETFs follow an index. Currently ETFs have gone beyond just mirroring an index such as the S & P 500 and know follow different industry groups and sectors. The advantage of dealing with an ETF is that; you do not have to open multiple accounts they tend to have lower tax liability you do not have to deal with the individual contract details of each stock.
This article has shown the attraction of trading in ETFs. You've learned how they are traded, their costs, and their benefits. Now is the time to take advantage of that and consider making them part of your overall stock market strategy. - 23305
About the Author:
A former fund manger will teach you the insider trading secrets that takes away the emotion from trading.
posted by Mr. Forex at
1:14 PM
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