Abstract

This article provides an overview of Exchange Traded Funds (ETFs) and discusses their features including creation, redemption, and trading mechanism. The article further describes the 10 broader categories and 96 sub-categories of ETFs, net assets and annual issuances of ETFs and merits and demerits of investing in ETFs. As a passive but diversified investment strategy, ETFs appear to be better investment vehicles in terms of taxes, lower management fees and expenses, and portfolio risk management. The strategic investment decision in ETFs however depends on investors’ objectives, attitudes towards risks, and time horizon of investment because investing in ETFs could have diverge implications especially during the formation and distribution phases of retirement or pension funds.

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