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Huge growth of ETFS investment which now controls around $2 trillion of financial markets have concerned financial regulators since it can be a new source of scandal or even systemic risk. ETFS is a fund that tracks an index, but can be traded like a stock. On the plus side, ETFs are more tax efficient than normal mutual funds, and since they track indexes they have very low operating and transaction costs with them. There are no sales loads or investment minimums required to purchase an ETFS. ETFS allow investors a convenient way to purchase a broad basket of securities in a single transaction. Essentially, ETFS offer the convenience of a stock along with the diversification of a mutual fund.
Today, these securities compete with mutual funds and offer a number of advantages over their predecessors, including:
Low Cost
Unlike traditional mutual and index funds, ETFs have no front- or back-end loads. In addition, because they are not actively managed, most ETFs have minimal expense ratios, making them much more affordable than most other diversified investment vehicles. Most mutual funds also have minimum investment requirements, making them impractical for some smaller investors. By contrast, investors can purchase as little as one share of the ETF of their choice.
Liquidity
Whereas traditional mutual funds are only priced at the end of the day, ETFs can be bought and sold at any time throughout the trading day. Many have average daily trading volumes in the hundreds of thousands of shares per day, making them extremely liquid.
Today, these securities compete with mutual funds and offer a number of advantages over their predecessors, including:
Low Cost
Unlike traditional mutual and index funds, ETFs have no front- or back-end loads. In addition, because they are not actively managed, most ETFs have minimal expense ratios, making them much more affordable than most other diversified investment vehicles. Most mutual funds also have minimum investment requirements, making them impractical for some smaller investors. By contrast, investors can purchase as little as one share of the ETF of their choice.
Liquidity
Whereas traditional mutual funds are only priced at the end of the day, ETFs can be bought and sold at any time throughout the trading day. Many have average daily trading volumes in the hundreds of thousands of shares per day, making them extremely liquid.