Elite Capital International: How do we earn the ETF way?
By: Elite Capital International
Below are the ways you can earn thru ETF':
Portfolio managers or brokers who are more involved in buying and selling of shares, stocks and holdings from one fund to another tends to have higher expense rate. This type of Exchange-Trade-
An indexed-stock ETF provides investors with the diversification of an index fund as well as the ability to sell short, buy on margin, and purchase as little as one share since there are no minimum deposit requirements. However, not all ETFs are equally diversified. Some may contain a heavy concentration in one industry, or a small group of stocks, or assets that are highly correlated to each other.
Dividends and ETFs
Aside from generating gains as stocks rise and fall, investors of ETFs also benefits from companies that pay dividends. A portion of earnings paid or allocated by the companies to investors for holding their stocks is called 'Dividends.' ETF shareholders are entitled to a proportion of the profits, such as earned interest or dividends paid, and may get a residual value in case the fund is liquidated.
ETFs and Taxes
Since buying and selling of funds occurs through exchange, ETF is more tax efficient compare to Mutual Fund. An ETF sponsor do not need to redeem shares each time an investor sells or issue new set of shares whenever an investor buys. Redeeming shares can cause a tax liability but by way of listing shares to exchanges taxes cost can be lowered.
ETFs Market Impact
In view of the fact that ETFs have become unexpectedly saleable with investors, many new funds have been created resulting in low trading volumes. The effect can cause investors not being able to buy and sell shares of a low-volume ETF easily. Some ETFs rely on portfolio models that are untested in different market conditions that lead to extreme inflows and outflows from the funds, which have a negative impact on market stability.
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