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Advantages of ETFs: Low Minimum Investment and Trading Flexibility
Posted By Ron On July 12, 2012 @ 8:08 AM In Exchange Traded Funds,Investing,Personal Finance | Comments Disabled
I’ve already written about Why ETFs Beat Individual Stocks  but did you know ETFs also beat mutual funds? Though Exchange Traded Funds (ETFs) and mutual funds both allow investors to own a group of investments by making just one purchase, ETFs have several distinct advantages over mutual funds:
If you’re planning to directly invest  in a mutual fund, remember that nearly all mutual funds have minimum investment requirements, meaning that investors must purchase at least the minimum required amount in order to buy the fund. Minimums usually range from $1,000–3,000, though some can exceed $25,000. ETFs, on the other hand, have no minimum investment requirements. Investors can buy a single share of an ETF.
Vanguard has a $3,000 minimum investment requirement, while some Schwab funds require $10,000 (and up). I don’t know about you, but those kinds of numbers put investing out of reach for a large number of people.
The beauty of an ETF is that investors can easily purchase a single share of a large index without having to get a cash advance on a credit card.
Stocks and ETFs change hands constantly throughout the standard trading day (9:30 a.m. to 4:00 p.m., Monday through Friday). Buying and selling mutual funds works differently. Though you can place orders to buy and sell funds at any time during the trading day, your orders won’t be fulfilled until shortly after trading ends at 4:00 p.m. each day. The delay that mutual funds impose on trading can be more than an inconvenience — it can also be costly. For example, if the market rises or falls in response to a major news event, such as a shift in interest rates or a spike in the price of oil, you might want to buy or sell your investment immediately, since the price of the investment might change substantially by the end of the day. ETFs let you buy or sell immediately — mutual funds don’t.
You’ll have to open an account at a brokerage company. Click the links below to get further information:
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 Why ETFs Beat Individual Stocks: http://www.thewisdomjournal.com/Blog/why-etfs-beat-individual-stocks/
 ETFs have Low Minimum Investment and Trading Flexibility: http://www.thewisdomjournal.com/Blog/advantages-of-etfs-low-minimum-investment-and-trading-flexibility/
 ETFs typically have lower Expense Ratios: http://www.thewisdomjournal.com/Blog/the-advantages-of-etfs-lower-expense-ratios/
 ETFs also offer some tax advantages: http://www.thewisdomjournal.com/Blog/advantages-of-etfs-fewer-taxes/
 ETFs offer protection against possible fraud: http://www.thewisdomjournal.com/Blog/advantages-of-etfs-reduce-the-risk-of-fraud/
 ETFs have opportunities for options and short selling: http://www.thewisdomjournal.com/Blog/advantages-of-etfs-options-and-short-selling/
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