The benefits of investing in ETFs

The benefits of investing in ETFs
0 comments, 10/08/2014, by , in Investing

ETFs, which are now becoming more common, are the ideal investment that is suitable for various time horizons. They provide a simple way to build portfolios that can satisfy different investment objectives, making it possible for the audience of investors to have direct access to markets otherwise difficult to reach.

They are suitable for different investment horizons and allow you to take a position in real time on a market index with a single operation and at a price that reflects the value of the fund at that precise moment. In addition, unlike the traditional mutual funds, ETF provides a continuous treatment that makes it possible to know the market value of the instrument at any time.

The elements of advantage of the ETF are: diversification, transparency, costs, liquidity and flexibility.

ETFs

ETFs

Diversification

With a single purchase transaction you may have a more efficient investment diversification than the typical purchase of individual securities. The diversification that ETFs also allows you to have immediate exposure to a basket of shares that can contain up to hundreds of different titles with a consequent reduction in risk.

Transparency

The high degree of transparency of the investment objective of the fund comes from the clarity given in the reply to a chosen benchmark index, as well as the ability to learn in real-time the exposure of the ETF and be able to monitor the progress.

Costs

The costs of the ETF are very competitive. The investor knows immediately the total annual cost, exemplified in the TER (Total Expense Ratio), or the annual fee, which averages 0.35% per year in Europe.

Liquidity

Being listed on the stock market funds, ETFs are bought and sold at a known price with a reduced gap between buying and selling due to the presence of specialists that provide liquidity to the market and have specific obligations regarding the minimum amount to be exhibited in the purchase and for sale. Operators are obliged to continuously expose proposals for the sale and purchase, even in the extreme case of total absence of the same. The source of liquidity is given by both the volume of trade in the secondary market and the volume of the underlying assets.

Flexibility

ETFs can be traded and, in the same way, be exploited for either short term or even in the medium / long term (more profitable). ETFs are placed through an asset alllocation that is both strategic and tactical.

ETFs are therefore simple, transparent and profitable products. At the same time, they are extremely widespread and numerous, so they may be a suitable option of investing.

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