Tuesday, May 4, 2010

Differences in ETFS

Aside from the types of securities they invest in, ETFs. or exchange traded funds, vary over the lot.

They may differ when they track an index set by securities’ earnings rather than by securities’ market weightings. That will make a difference. Of course, index makeups may vary within the group types. The number of shares in an index is important, as the size and trading value of those shares will then vary.

Trading volume is important as liquidity helps traders in ETFs. And there are many who periodically want their dividends reinvested. It’s important they get better pricing on small purchases.

Even if the ETFs use the same stock indexes, the underlying costs of operation may vary. Lower-cost is always the better choice.

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