Trading Index Funds
We have all had questions on Trading Index Funds before. Below are the top questions posed by visitors just like you to our. We hope our answers located below will help you solve your funding problems today. Feel free to ask another question, or even comment on what has been written.
There has been a lot of debate recently regarding Trading Index Funds, and it is therefore critical for you, the reader, to grab all of the information that is out there on the vast topic of funding. Your funding can have a huge impact on your future, so don’t procrastinate any longer. Read up on Trading Index Funds today!
Joel Said:
undervalued index funds?We Answered:
Since index funds report the value of their underlying stocks it should be pretty at least on their scheduled reporting days.Beverly Said:
What is the difference between a Exchange traded fund and a index fund?We Answered:
An ETF is an index fund as it holds a basket of stocks reflecting a particular index or sector. It can be bought or sold at any time during the day on the open market, and typically charges a fairly low amount for the management. Typically you might buy shares in an ETF, and 100 is the round lot multiple which is most easily traded, although many ETFs trade enough shares that you can get lower multiples traded as well. (eg. 83 shares at $12 for about $996). You'll pay a commission for each transaction, the amount varying with the brokerage you do business with.If you're referring to index fund as a mutual fund which tracks an index, it its price is typically set at the end of the day, and can only be sold or bought at the end of day price. Depending on the company that manages this fund, the expense for doing so are typically higher than that of ETFs. The advantage of a mutual fund is that you may just decide to put, say $1000 into it and they'll divide up the number of shares that represents and you'd get the exact amount. The expenses are hidden and subtracted from the returns the fund generates (as with the ETF).
Wendy Said:
Are stock index funds publicly traded, and can you buy into them on online brokerage sites?We Answered:
ETFs and index funds are not entirely the same thing.ETF's are "exchange-traded funds" much like mutual funds except they trade real time and can be bought and sold intraday whereas mutual funds can only be bought or sold at the last trade of the day.
http://en.wikipedia.org/wiki/Exchange-tr…
Some people call the S&P 500 Index, the DJIA etc, as ETF funds. I guess one could call them that, but for the "older" traders these indexes have been around a lot longer before the word ETF even existed.
So for me I just call "bench market indexes" (S&P 100, 500, DJIA, Russel 2000, Wilshire 5000, NASDAQ 100) bench market indexes. I refer to them as indexes as opposed to just ETFs.
The oldest "ETF" before it was called an "ETF," is the S&P 500 Index or SPYDER (SPDR).
http://www.sectorspdr.com/aboutspdrs/
Since ETFs have become popular, many of the older indexes such as the S&P 500 SPYDR (SPY), Nasdaq "Quad Q's" (QQQQ), The Dow "Diamonds" (DIA) now call themselves "ETFs" to attract the big ETF money.
One important ETF buying note:
I would watch for low ETF trading volume as some ETFs can have higher volatility and price spreads due to the lack of volume (liquidity).
The most heavily traded ETFs everyday are S&P 500 Index (SPY) and NASDAQ 100 (QQQQ).
Whatever one wants to call them, anyone can buy and sell them from any on-line broker.
List of major index ETFs:
SPY
SDS
QQQQ
QID
DXD
MZZ
DIA
IWM
BGU
BGZ
XLU
UYM
EWJ
XLF
IYR
REW
Type in symbol for more info:
http://finance.yahoo.com/q?s=SPY
More
"Exchange-Traded Funds (ETF) Center"
http://finance.yahoo.com/etf
Marie Said:
Are Exchange Traded Funds bettter than index funds?We Answered:
If you are going to buy small amounts at a time, then mutual index funds are better deals because of the commissions involved with buying ETF's. However ETF's allow the ease of trading in and out at a moments notice, mutuals do not. I usually buy large lump sums of funds so I mostly use ETF's. Some funds are not offered as ETF's so I buy the fund, like Vanguard Specialized Health Care which has better performance than the Vanguard Health Care ETF.Irene Said:
what are the differences between Stock Market Index & Exchange Traded Funds?We Answered:
An Index is just a way to keep track of how the entire market is doing.An ETF is an investment vehicle. Its like a share on a basket of stocks. This basket of stocks can either track (ie try to match the performance) an index (SPY tracks the S&P500, QQQQ tracks the NAsdaq 100) or just a specific secto (XLE tracks energy)
Clifford Said:
Exchange Traded Funds,Index Funds?We Answered:
Actively managed funds lose their shine as the market matures and hence outperforming broader market consistently for a long period is nearly impossible.As far as India is concerned only around 100-300 stocks are well researched and actively traded in the market and hence provide liquidity. Fund houses which go beyond these stocks can always pick-up winners and hence beat the market index. Just look at the how a large cap fund FT India Bluechip fund can better the Sensex index by huge margin. An yet to mature market like India will always offer better opportunities for the fund manager for the next 10-15 years.
ETFs and Index funds have low expense ratios and that is plus point. But in the diversified funds vs ETF/Index funds they are not mutually exclusive and hence they can compliment any investor portfolio.
Good luck.