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Wednesday, September 30, 2009

ETF's For You To Use

By Mike Swanson

The SPY ETF is the largest ETF in the world as of 2007. Its current sponsor is PDR services LLC, which is itself part of the American Stock Exchange LLC. It does have some stiff competition with stock picks, however. The New York Stock exchange provides a list of the best performing stock trading ETFs, including IVV, SSO, RSW, SH and RSU.

An exchange-traded fund (ETF) is an innovative way of trading on the stock exchange. The value of one of these funds is set at the value of the assets that it represents. This would effectively be the value over the entire trading day. The 680 ETFs currently account for $610 billion on the US markets.

Their popularity is based on the easy diversification that they facilitate across the entire index. In addition, ETFs are usually much cheaper to manage than most other trading options. They are also much more tax efficient than shares and stocks. As they can be bought at any time during the day they are also more flexible. Unlike other options, there is much more market transparency to ETFs.

Many critics have railed against ETFs for various reasons. Firstly, they do not provide sufficient flexibility. Secondly, they are short-term in their scope. Thirdly, any tax advantages are minimal to investors that usually use tax deferred accounts. Finally, it has been shown that they can often be used to manipulate market prices. However, many agree that an ETF can still be a wise investment.

They were conceived in the late 1980s, and had their origins in Index Participation Shares (IDSs). These were briefly traded on a variety of stock exchanges. The Chicago Mercantile Exchange then served a lawsuit that stopped sales of IDSs.

Following this the Toronto Stock Exchange began trading its own version of Index Participation Shares. These were so popular that the American Stock exchange started looking for something similar that could pass US regulation. The result was the ETF. The Standard & Poor's Depositary Receipts (SPDRs) became the first ETF in the United States. They are often referred to as "spiders" or "spyders". - 23223

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