Question

1. What are the advantages and dis-advantages between and ETF and a mutual fund that invests in a market index?

Answer 1

ETF

Advantages

1.Diversification: ETF can track a broader range of stocks, its can get return from group of contries

2.Lower charges : it will charge low amount compare tpo mutual funds

3.Trading: ETFs can be traded in the market like stock only

4.Dividends& Capital gains: In ETFs dividends will be reinvested , capital gains will be limited

Disadvantages

1.Higher cost :Commission charges will be higher compare to mutual funds

2.Low dividend yields:Dividend payment yield is lower in ETF

3.Leveraged ETF Returns Skewed:A leveraged ETF is a fund that uses financial derivatives and debt to amplify the returns of an underlying index

Mutual funds

Advantages

1.Expert management : Mutual funds will provide expert managament who can manage investment

2.Small amount : In mutual funds even small amounts also invested

3.Tax advantage: Investment in Mutual fund will provide tax deduction

4.Safety: Amount invested in in Mutual funds will be risk free and safety

Disadvantages

1.Low returns: Mutual funds provide low returns

2.Lock in period : Mutual funds will be lock for specifide period