ETF Advantages over Stocks : NobleTrading Blog

Tuesday, June 9, 2009

ETF Advantages over Stocks

Exchange Traded Funds (ETFs) are often compared against mutual funds and similar funds, not against stocks and other exchange traded products. ETFs also have some advantages over stocks and thus are handy instruments to include in your portfolio.

No need to screen for individual stocks – perhaps the most difficult task in stock trading is stock screening. ETFs let you to trade particular industry/market/sector as a whole (or with preferences) rather than screening 5 or 10 good companies in that sector.
Less price fluctuations and surprises – The major risk associated with trading individual stocks is surprising price fluctuations. But ETFs tracks more than a handful of stocks and thus are more liquid and less susceptible for rapid fluctuations.
Traders can easily go long or short – ETFs comes with less restrictions. Traders can go short whenever they want. Actually, ETFs are also very good instruments to test your short trading skills.
ETFs help you to control a diversified portfolio – With a lesser amount of investment in ETFs you can get control a portion of diversified ETF portfolio. Moreover ETFS also helps you in investing your money in market/sectors which are otherwise difficult to trade.