Trade ETFs

One of the most obvious benefits of ETFs is that they are probably the most cost-effective way to expose your account to all the underlying securities held by the ETF in question.

Another benefit is the diversification offered by ETF investing. Instead of exposing your account to the performance of just a few individual securities, an ETF allows you to passively allocate capital to many at once.

Furthermore, when trading an ETF (or an index), you only have a single trade to manage.

In addition, ETFs also distribute the dividends of the underlying securities held in the ETF portfolio proportionally to its investors, and there may also be some tax advantages to trading an ETF depending on your jurisdiction.

Finally, ETF investing is much more suited to beginners, due to the inherent diversification of the product.

ETFs are generally regarded as being far more transparent than mutual funds in several ways. The precise mix of securities held by an ETF is published daily, so as an investor, you can know exactly what you are holding. The precise mix of securities held by an ETF is published every single day, so as an investor you can know exactly what you are holding. Mutual funds, on the other hand, only publish their holdings once per quarter, which means that you can never really be sure of the exact asset mix you’re investing because by the time it is published, it can already be out of date.

ETFs are also more transparent in terms of costs, due to the fact that all the costs of trading are present in the spread, plus the commissions paid by the trader. This means that the activities of any one investor do not affect others. The same cannot be said for mutual funds, where the trading costs related to inflows and outflows are borne by all individual investors in the fund. The exchange-traded nature of an ETF makes its fee structure far more transparent to investors than that of a mutual fund, which is not traded on an exchange.

Finally, ETFs are considered more liquid than mutual funds because they are traded on an exchange. This means that an ETF can be bought and sold all day long, whereas, in the case of mutual funds, you are purchasing directly from the issuer, not the market itself, at the relevant price at the day’s end.