The Advantages Of ETF Trading: Basics

Posted by Patrick Deaton

November 7, 2009

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.

There are numerous advantages to ETF trading. It has many of the benefits that stock provide. However, ETFs are usually very affordable when they are not actively-managed. Most ETFs do not have 12b-1 fees. There are lower accounting, distribution, and marketing costs. And, there is not forced purchase or sales of securities to pay shareholders.

A person moving from stock trading to ETF trading will notice a distinct increase in the flexibility of buying and selling. ETFs are bought and sold at any time during the trading day. A trader can buy shares on margin and sell short to employ hedging strategies. Many of the stock trading benefits come with ETFs. A trader can use limit orders, stop-loss orders, buy on margin options, etc.

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.

When considering ETF trading it is important to talk to a professional who has knowledge about ETF trading and the intricacies of the market. There are many complex details that one should have a solid knowledge in before entering trading. A professional will be able to assist and advise an individual in the best strategy to be successful when they begin trading.

Learn how it’s very possible to make 6% per month in your investment accounts using etf trend trading! “Big A” is a recognized expert in the world of etf trend trading system … reveals etf secrets that have been kept under wraps by hedge traders for years. Give him your email … get a free report … webinar today!

Personal Finance

Tags:Personal Finance
Technorati Tags:Personal Finance

If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Comments

No comments yet.

Ebay Deals on Personal Finance

[CaRP] Can't open cache file.

Personal Finance

Ordermaster NEW by L.E. Jr. Modesitt
10 Jun 2010 at 8:33am
US $11.43
End Date: Monday Aug-09-2010 6:38:35 PDT
Buy It Now for only: US $11.43
Buy it now | Add to watch list

RACHAEL RAY NEW 10 Pc COOKWARE Orange Porcelain Enamel
14 Aug 2009 at 8:33am
US $189.87
End Date: Monday Aug-09-2010 6:38:46 PDT
Buy It Now for only: US $189.87
Buy it now | Add to watch list

Tarot Card Reading 8 Card Spiritual Guidance ANY TOPIC
10 Jul 2010 at 8:41am
US $5.99
End Date: Monday Aug-09-2010 6:41:20 PDT
Buy It Now for only: US $5.99
Buy it now | Add to watch list

Power and the State NEW by Martin J. Smith
10 Jun 2010 at 8:37am
US $40.27
End Date: Monday Aug-09-2010 6:42:02 PDT
Buy It Now for only: US $40.27
Buy it now | Add to watch list

Empire Unacquainted with Defeat NEW by Glen Cook
10 Jul 2010 at 8:38am
US $17.84
End Date: Monday Aug-09-2010 6:43:37 PDT
Buy It Now for only: US $17.84
Buy it now | Add to watch list

Youtube Videos for Personal Finance

[CaRP] Can't open cache file.

Videos tagged with Personal Finance

iFreeBudget - Transactions tutorial
8 Aug 2010 at 8:37pm

iFreeBudget tutorial - Creating transactions
8 Aug 2010 at 7:57pm

NotLinda Dot Com - Vote Peter Schiff
8 Aug 2010 at 1:09pm

Future personal finance interface.mov
8 Aug 2010 at 1:32am

Bestsellers on Personal Finance

[CaRP] Unknown document format.

Could not open http://www.searchfeed.com/rd/feed/XMLFeed.jsp?trackID=B7643778475&cat=Personal+Finance&pID=41711&nl=2&page=1&ip=38.107.191.90 for parsing!

The Advantages Of ETF Trading: Basics

Comments

Leave a comment

Ebay Deals on Personal Finance

Youtube Videos for Personal Finance

More Videos for Personal Finance

Bestsellers on Personal Finance