Discuss at least two advantages of ETFs over conventional mutual funds. Please provide an example of either a broad index or industry index.
Answer preview
The second advantage of ETFs over mutual funds is that the investor has more control of trade. Considering how mutual funds work, ETFs favors the investor and prevent huge losses. Mutual funds allow the investor to trade only once a day using the closing net assets value. Hence, the investor has no chance to stop the investment if he/she forecasts a loss. On the other hand, ETFs work just like stock. Thus one can trade the whole day without limitations. Therefore, ETFs allow the investor to have full control of the buying and selling prices. This way, the investor can stop the investment at any time whenever the trade is not promising. Furthermore, ETFs mostly use the broad index to monitor the performance of different types of stocks. As a result, the investor gains more advantages in the exchange market. A good example
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