Exchange Traded Funds Review
October 3rd, 2010 | Author: weissheiss
exchange traded funds refers to a type of investment that is common in the stock exchange market. The funds trade in stocks and bonds just like most investments that can be found in the stock market. They are popular with many investors because, they come with benefits like low cost of management, tax efficiency and features that make them easy to track and manage.
exchange traded funds are more suited for large corporations and institutional investors. This is because, once they have been bought, they are then exchanged with the stocks of their underlying securities. This is to say that while the ETF is bought as a unit, it may be exchanged for the smaller specific units that comprise the larger unit.
The ETFs work in such a way that, it is possible to trade them on each and every day at the net asset value on that day. This is different from other types of funds, which in most cases trade at prices which may be more or less than the net asset value. ETFs and close-end funds are in many cases thought to be one and the same thing but they are not.
They offer investors a wide pool of securities and are more similar to mutual funds, the only difference being that, they are traded on a daily basis as investors may wish.
Some of the key characteristics to note about the ETFs include the fact that the investment manager issues or redeems the units in exchange of the current value of the smaller units, which are disseminated on a per share basis. An investment manager in charge of it must identify himself as such in any sales literature and must only issue those shares that have been approved for trading on the stock exchange market.
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