5 Powerful Reasons to Invest in ETF's

Exchange Traded Funds (ETF), have become increasingly popular.

ETF’s have some significant advantages over traditional mutual funds.

ETFs are similar to index mutual funds. Index mutual funds and ETFs often duplicate their holdings. within a specific index or benchmark. The main difference between ETFs and mutual funds (including index mutual funds). ETFs are traded and priced throughout the trading day like stocks. Mutual funds (including index funds) are only priced once per day. At the end of the trading day when the market closes.

One big advantage for ETFs is that they are much cheaper than many actively managed mutual funds. This is because they are computer driven models running the investments rather than a highly paid investment managerial team. That means they don’t have an extra head win that comes from that managerial expense to overcome on their performance numbers. One of the big complaints about mutual funds is that management, operating fees, and even commissions. are hard to overcome.
Lower investment turnover (buying and selling of holdings). This helps keep costs down.
Intraday trading for ETF’s. Mutual funds are priced and bought sold only one time at the end of the trading session. That means if you put a sell order in for your mutual fund in the morning you do not know the price until the market close. If your the market where your fund invests drops after you put in the trade order you are stuck with that day’s closing price. With an ETF, it trades like a stock and you get the price as soon as a buyer or seller is fund for your order,usually within seconds of your order.
ETFs are more tax efficient than mutual funds
The Tax Benefits of ETFs
Many investors may turn to exchange traded funds (ETFs) for more transparency or lower costs, but they often forget that these assets are also tax efficient. The magic of this lies in how shares are exchanged. The issuer creates and redeems existing shares through an “in-kind” process involving large institutional investors called authorized participants (AP). The APs have an agreement with the ETF trust and their custodial bank that allows them to create or redeem shares of the ETF in blocks known as creation units.
During the creation process, the authorized participant delivers a basket of securities held in the ETF to the issuer in exchange for a creation unit. In a redemption, however, the authorized participant receives a basket of securities while the fund collects a creation unit. Since these transactions happen in shares and not in cash, there are no capital gains. What’s more, the law states that capital gains are not recognized at the time of the transaction and thereby not considered a taxable sale.
This structure may create meaningfully different after-tax returns between an ETF and an index-tracking mutual fund — even if both track the same index.
More and more interesting investment portfolios are being made available to investors including niche investments and alternative assets classes that can add diversity to your portfolio.