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Stock Market Trading
Advantages of ETFs
ETF and Exchange Traded Funds, QQQQ, SPY, DIA stocks that track NASDAQ 100, S&P
500 and DJI indexes, investors, investing, funds, portfolio
Exchange Traded Funds (ETFs) are investment funds that are traded on the
stock exchange like stocks. ETFs may track stocks, bonds and other assets.
However, the majority of exchange-traded funds track indexes. QQQQ, SPY and DIA
are examples of ETFs that track the
NASDAQ 100 (^NDX),
S&P 500 (^SPX) and
Dow Jones
Industrial (^DJI) index, respectively. Investors cannot trade indexes
directly. Therefore, the exchange traded funds provide them with an ability to
buy and sell an index's assets through a corresponding ETF.
Exchange Traded Funds are funds that can be traded like stocks, which make them
unique and very attractive to a wide range of investors. Since the introduction
of ETFs, they have become the most popular trading vehicles in the investors'
world. Below is a list of some benefits provided by ETFs:
- By investing in a single ETF, an
investor is buying or selling an entire portfolio of stocks. One single
transaction can greatly diversify a portfolio.
- Unlike traditional mutual funds, ETFs
can be bought on margin.
- All Exchange Traded Funds can be sold short and can be used in
bear markets.
- Unlike traditional mutual funds,
ETFs can be traded (bought and sold)
throughout the trading session.
- Low ETF prices make them affordable to regular investors. An ETF
has lower costs than a basket of covered stock. For example, it is cheaper
to buy one share of QQQQ than
to buy one share of each stock from the
NASDAQ
100 index basket (100 stocks, some of which are very expensive).
- There is no minimum purchase. A trader may buy or sell short as
little as one share.
- Unlike traditional mutual funds, there are no high management
fees.
- Like common stocks, ETFs provide an opportunity to receive
dividends.
- ETFs are easy to analyze and trade. There is no need for
complicated fundamental analysis that may be required when investing in
stocks. There is no need to go through thousands of stocks in order to
select only a few. All of that work is done by sponsors who track indexes.
All that must be done is the index analysis.
V. K.
Copyright 2004 - 2010 Highlight Investments Group. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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