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Exchange Traded Funds are just that, funds traded on exchanges. An ETF is an index stock issued by an investment company. ETF composition matches the composition of the underlying asset, most frequently a stock index and its price copies the development of the price of the index with small deviations.

Differences between ETF

  • By underlying asset - stocks, currencies, bonds, commodities (ETN)
  • By issuer - Barclay's Global Investors, State Street Global Advisors, Invesco PowerShares, Lyxor.
  • With or without foreign capital - leveraged (ultra), unleveraged
  • By direction of speculation - short (market drop), long (market growth)
  • ETFs that pay or reinvest dividends.

Benefits of ETFs

  • Portfolio diversification - e.g. by purchasing a DJIA index stock you are investing in the 30 titles on the Dow Jones 30 Index.
  • Transparency - composition of the stock index is always clear and the ETF strictly follows this composition.
  • ETF assets are strictly separate from the issuer's assets and are not included in the bankruptcy estate.
  • Liquidity - bids and offers are created in the same manner as for stocks. ETFs can be sold in a matter of seconds and investments can be redirected quickly.
  • Investment yield - only 1/3 of mutual funds are able to meet their benchmarks.
  • Margin trading options for top US indexes up to 90% of the total investment.

For more information about strategies for investing in ETFs, please visit www.akcie.cz.

How to start trading ETFs?

You can find more information here.


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