It is important to learn to walk before before you learn to dance and few are as privileged as Prabhu Deva or Michael Jackson to do both seamlessly
Exchange Traded Funds (ETFs) play an important role for an investor in his/her investment strategy. ETFs provide ease of asset allocation and convenience of capturing the index potential without the hassle of basket formation and regular recalibration. This way ETFs take the benefits of mutual fund investing to the next level.
For an active investor, ETFs allow almost real time investment into the fund. The index experiences price changes throughout the day. ETFs reflect these changes like a stock. Thus, an investor can use ETF to buy and sell at near index levels.
ETFs by nature are low-cost products as compared to active mutual funds. Since ETFs broadly replicate the index, the need for active trading, fund management and analysis does not arise per se. This reduces the cost of fund management. For this reason, the regulators limit the chargeable expenses to the ETF.
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