In a traditional fund does not know what it will cost each share at the time of ordering and it can only be purchased at the end of each trading session. 4. Management fees and deposit of the ETF are usually significantly smaller than those of traditional funds, which has a major influence on the long term profitability. 5. ETFs tend to pay dividends. That means they are valid for a regular income with which to address other investments (ETF, shares, property) or any expenses (credit, consumer spending, etc) Without having to sell the shares. 6.
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The ETF is invested 100%, while the index funds have to maintain a liquidity ratio required (around 5%) to meet the repayments. This differs from long-term profitability important for ETFs, since equity is more profitable than fixed and that 5% (approximate) fixed income funds to be kept by traditional means a drag for profitability. 7. With ETF’s can implement strategies that are not possible with index funds. We already have explained the main differences between ETF and index funds, but for better understanding, in the next chart we have it more clearly:
Source: http://www. ici. org/pdf/bro_g2etf_p. pdf The only advantage of traditional funds to ETFs in some markets such as Spanish is that traditional index funds have a more favorable taxation. For many investors make transfers from one fund to another can be an advantage. For investors who hold their investments for long delays or even permanent advantage of traditional funds can not offset all the disadvantages.
The profitability of the ETF is higher than traditional index funds that has lower commissions, dividends received (which can be reinvested in the ETF itself, actions, etc. ) And the fact of being 100% invested. Although in some cases be preferable to traditional funds (for taxation) along the ETF’s I think a better option. When we are talking about ETF’s we can say that with ETF’s we can do more things that with index funds. a. Selling out in the open like stocks. I mean, sell first with the idea of ?? uying back later at a lower price. It is similar to selling futures or selling shares on credit and has a high risk. b. Can be combined futures and options to develop strategies like covered call, which would be achieved, for example, buying an ETF on the Dow 35 and selling a call on the Ibex
