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I wish to know if small investors have any advantage of investing in ETF?
- Ash Korgg
An exchange traded fund (ETF) is an investment fund that can be traded in the stock exchange like stocks. Unlike regular mutual funds, an ETF can be bought and sold directly on the exchange through a stockbroker during trading hours.
They are advantageous for asset diversification and are mostly used as long-term investments for asset allocation. All these are features that benefit small investors. However, because ETFs are like index funds that invest in stocks that constitute an index in exactly the same weightage as in the index, there is an element of passivity when investing in ETFs. And, ETFs also score on low cost and expense ratio compared to index funds and actively-managed funds.
This article was originally published on March 23, 2011.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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