An ETF (exchange traded fund) is a way of investing money with other people who are participating in a wider range of investments. Like the stock exchange. ETF can hold assets like stocks or bonds and trade them at about the same price as the net asset value, which is minus the liability of that asset. This is through the period of a trading day.
Most ETF track by measuring a stock market as a whole. Much like The Dow. And ETF appeal to most as good investments due to low cost, tax reliability and it’s stock like features. Which is a combine calculation similar to mutual fund which can be purchased or redeemed at the end of each trading day. With a Closed-End Fund, which is a collective investment pool with a limited amount of shares.
Most investors can buy and sell ETF shares only in the market transactions, but organised and established investors can redeem large blocks of ETF shares for a chunk of the bottom lined assets or exchange. This creation and redemption of shares enables the organised foundations to use the practise of taking advantage of a price difference between two or more markets that causes the value of ETF to be about the same as the net asset value . Taking away the liabilities of the underlying assets.
ETF can offer a public investor a share in the legal right given to a creditor by a borrower of assets. Which is similar to the traditional mutual funds. The difference is you don’t sell or redeem individual shares at the net asset value. Instead financial organisations purchase and redeem directly from the Exchange Traded Fund. But only in large quantities of different sizes. This is called Creation Units. So purchasing or redeeming of the Creation Unit is generally in a form of goods or service as
anything can be used as money, but legal tender is what the State accepts for all debts.
Exchange Traded Fund provide easy spreading of investments, low expense calculations, tax reliability in investment funds, managed funds, general funds or mutual funds. As well as still maintaining all the features of ordinary stock. Such as limit orders, short selling and conveying the right to and yet having no obligation to re-participate in future transactions.
Since ETF can be acquired, held and disposed of. Some invest for the long term to accumulate assets. While others trade regularly initiating a market investment plan through timing.
So the advantage of ETF is overall Lower costs in marketing, distribution, accounting and most dont have 12b-1 fees like mutual funds and expenses.
Buying and selling flexibilities at the end of the trading day through publicly traded securities, shares purchased on a margin and sold short, making it possible for an investment to be taken out for the purpose of reduction or to cancel out another risky investment. Market exposure and diversification, and transparency.