What are some of the advantages and disadvantages of investingin Exchange Traded Funds (ETFs) versus...

What are some of the advantages and disadvantages of investing in Exchange Traded Funds (ETFs) versus investing in individual stocks? Would you prefer to invest in ETFs or individual companies and why?

Solutions

Expert Solution

Advantages of ETF

1. It provides diversification by reducing the unsystematic risk of individual companies.

2. It has a limited capital gain tax.

3. Immediately Reinvestment of dividend.

Advantage of Stocks:

1. It has the potential to provide higher returns.

2. Freedom of selection: Investor can actively select the company in which he wishes to invest.

Disadvantage of ETF:

1. ETF's can be highly concentrated to only large-cap stocks.

2. It has a lower dividend yield when compared to owning an individual stock.

Disadvantages of stocks:

1. It has high unsystematic risk or company-specific risk. (No diversification benefit).

2. It requires a lot of time to actively manage the portfolio.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Discuss the advantages and disadvantages of exchange-traded funds versus open-end mutual funds. Include a discussion of...

Discuss the advantages and disadvantages of exchange-traded funds versus open-end mutual funds. Include a discussion of the clients most suitable for these types of investments. In response to peers, discuss further the comparison of exchange-traded funds and open-end mutual funds.

Investing: Inverse ETFs (Exchange Traded Funds) Inverse ETFs, sometimes referred to as "bear market" or "short" funds,...

Investing: Inverse ETFs (Exchange Traded Funds) Inverse ETFs, sometimes referred to as "bear market" or "short" funds, are designed to deliver the opposite of the performance of the index or category they track, and so can be used by traders to bet against the stock market. The following table shows the performance of three such funds as of August 5, 2015.† Year-to-Date Loss (%) MYY (ProShares Short Midcap 400) 6 SH (ProShares Short S&P 500) 5 REW (ProShares UltraShort Technology) 7...

Which one of the following statements regarding exchange-traded funds (ETFs) is false?

Which one of the following statements regarding exchange-traded funds (ETFs) is false? The ETFs offer clients professional investment management and advice. The ETFs trade at a price close to NAV. The number of shares in the ETFs can change over time Most ETFs track an index

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

What are the advantages of exchange traded funds to mutual funds and closed end investment companies Just need 100-150 words with 2 refrences

what are some similarities and differences between mutual funds and exchange traded funds and what are...

what are some similarities and differences between mutual funds and exchange traded funds and what are there strengths and weaknesses? Give Example please! Explain as if you were talking to someone with no financial background

What are some of the advantages and disadvantages to using statistical sampling versus judgment sampling ?

QUESTION #4 /8 (2 marks each) Answer the following questions regarding Exchange-Traded Funds (ETFs), in your...

QUESTION #4 /8 (2 marks each) Answer the following questions regarding Exchange-Traded Funds (ETFs), in your own words: a. How are ETFs typically structured? b. Please describe how an in-kind exchange works? c. What are the risks related to the composition of an ETF? d. Why is “securities lending” a risk for ETFs?

What are the advantages/disadvantages of an LLC versus a LLP? Explain!

1-What are some advantages and disadvantages of top - down versus bottom - up investing styles?...

1-What are some advantages and disadvantages of top - down versus bottom - up investing styles? 2- Discuss the advantages and disadvantages of the following forms of managerial compensation in terms of mitigating agency problems , that is , potential conflicts of interest between managers and shareholders . a . A fixed salary . b . Stock in the firm . c . Call options on shares of the firm .

Assess the advantages and disadvantages of adoption of the Fixed versus Flexible exchange rate system. Choose...

Assess the advantages and disadvantages of adoption of the Fixed versus Flexible exchange rate system. Choose and explain the exchange rate regimes you consider to be best suited for the small developing countries.

Subjects