ETFs in brief

Article Excerpt

Exchange-traded funds are set up to mirror the performance of a stock-market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings of that index or sub-index and will allow the fund to “track” its performance. The MER (Management Expense Ratio) is generally much lower on ETFs than on conventional mutual funds. That’s because most ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index. ETFs practice this “passive” fund management style, in contrast to the “active” management that conventional mutual funds traditionally provide at much higher costs. This traditional, passive style usually keeps turnover very low, and that in turn keeps trading costs down for your ETF investment. investment…

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