Question

What are the advantages of exchange traded funds to mutual funds and closed end investment companies

Just need 100-150 words with 2 refrences

Answer 1

There are several advantages of exchange traded funds (ETF) to mutual funds and closed end investment companies. First of all ETFs have a higher degree of simplicity associated with them. One can buy and sell ETFs at one price and with one easy transaction. However in case of mutual funds shares in the assets are constantly being traded and these multiple trades result in multiple prices leading to multiple fees and commissions. Secondly ETFs are more cost effective than mutual funds and closed end schemes. This is because in case of mutual funds and closed end schemes management fees are often high as the funds have to be actively managed. This is not so the case with ETFs which involves one simple transaction. This leads to lower fees and commissions in case of ETFs.

(134 words)

References:

1. https://www.thebalance.com/etfs-vs-mutual-funds-the-battle-continues-1214710
2. https://www.investopedia.com/articles/exchangetradedfunds/11/advantages-disadvantages-etfs.asp