Exchange-traded fund(ETF) is kind of an index fund that invest in an index, a commodity, currencies, bonds etc. ETF is an excellent investment instrument for achieving investor’s goals, provided used wisely. Let’s got through various advantages and disadvantages of investing in ETF.
- They are listed and traded on a stock exchange like common stocks. So, can be bought and sold at any time of the day.
- ETF includes almost every investing asset class including commodities or currencies. It gives you exposure of any market, any sector in the world.
- Liquidity of ETF is very high and charge lower fees.
- Investors can place different types of order for buying ETFs like stop-loss order, buy on margin etc, as they are traded like stocks in market.
- As ETF includes wide range of investment option, deciding on a particular instrument is sometimes get difficult for an investor.
- Proper knowledge of ETF is needed to invest.
- For investing in global ETFs, following fundamentals and credit worthiness of currency in that country is very essential. Along with this, economic, social and political instability can also hurt your investment.
So, after going through both pros and cons of investment in ETF, you will be able to make better investment decisions. ETFs are only 25 years old investment instruments, growing in popularity exponentially. ETF may be cheaper option when it comes to investing a large sum in one block.