Everything About Exchange-traded fund (ETF)

 Exchange-traded fund (ETF)

An ETF or Exchange-traded fund is a type of investment fund that is made up of a variety of assets and its units are traded on the market during the day like stocks and have a structure similar to mutual funds; that is, during the hours and days of the open stock market You can buy one or more units of an ETF box, or sell several units of it. By buying ETFs, you invest your money in a fund that uses a professional management team to try to make a profit by forming a portfolio of stocks and securities.

As mentioned, these funds have a structure similar to mutual funds, but unlike mutual funds, which can only be bought and sold at the end of the day and after NAV calculation, investors can trade ETF units as stocks during the day and take advantage of them. Its liquidity is faster than the mutual fund. Also, the advantage of the potential tax exemption for investing in these funds and the fact that they are less expensive are other features of this investment model in the capital market.

Of course, these types of funds also have limitations, including the fact that because they are traded like stocks, it is possible that the stocks of these funds will be traded at different prices from NAV before the disappearance of arbitrage and balance. Investing in ETF funds is very similar to investing in mutual funds, but the main difference between the structure of ETFs and other investment funds is the creation of liquidity using the potential of the stock market.

In ETFs, the liquidity guarantor pillar is eliminated and a new pillar as a market maker provides the liquidity of ETF investment units in the market and when there is no supplier or no other buyer to sell or buy the requested units or supply. It has been tried. Stock exchanges or ETFs are divided into three categories: equity investment, mixed investment, and fixed-income investment. The difference between these three types of funds, in addition to their trading strategy, which is named after them, is in their purchase and sale fees.

These types of funds have been introduced to the market for more than 20 years and have experienced significant growth over the past decade. The first ETF was introduced in 1993 under the name Spider (SPDR), which is designed to follow the S&P 500 index.

Advantages of ETF tradable investment funds

-Tax exemption for unit transactions

-Increase the liquidity of the fund's units despite marketing operations

-Optimal allocation of assets (diversification) by eliminating costs and spending little time

-Simplicity, ease and speed in trading

-Reduce treatment time compared to current funds

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