By staff at Forex Trading in South Africa.
Being a marketable security, an Exchange-Traded Fund or ETF tracks a commodity, a stock index, bonds as well as assets. The price of an ETF’s shares is more likely to change as they are bought or sold throughout the day. The ETFs have underlying assets like oil futures, gold bullion, shares of stock, foreign currency, etc. This type of fund divides ownership of the underlying assets into shares.
The ETF shareholders will receive a proportion of the profits, such as dividends paid or earned interest. If the fund is liquidated, then the shareholders may also receive a residual value. Compared to a mutual fund, an ETF is more efficient as the buying and selling mainly occurs through an ETF sponsor. ETFs promise lower average costs and on owning an indexed stock ETF, the investors will also be able to sell short, buy on margin or purchase a share. Some brokers might not take any commission on some low-cost ETFs that can be quite beneficial for small investors.
The emerging markets have experienced recession in the past few months that saw many investors fleeing these markets. The emerging markets have mostly been hit by the trade policies of the Trump Administration and the increase in the price of the US dollar. Nearing the end of 2018, some light can again be seen in the emerging markets. At the moment, investing in ETFs might prove to be promising for the investors in emerging markets.
- MSCI Emerging Markets Index ETF
The traders will find some of the most interesting MSCI ETFs on IQ Option. The iShares MSCI Emerging Markets ETF has received “an approximate $91.3m inflow – that’s a 0.3 per cent increase week over week in outstanding units (from 719,550,000 to 721,800,000)”. According to etf.com, MSCI Emerging Markets Index ETF has been quite promising with EDZ being quite prominent.
- SPDR Portfolio Emerging Markets ETF (SPEM)
One can expect the emerging markets to bounce back if the Chinese continue to add fiscal, monetary and policy stimuli to the country’s economy. The tension of beginning a trade war has also affected the emerging markets and the present scenario shows that there might be an EM bounce, compared to the US markets. SPEM can be said to be one of the most inexpensive options that will expose the trader to the emerging markets.
- Xtrackers USD High Yield Corp Bond ETF (HYLB)
October 2018 was not so profitable for high yield as there was a possibility of a slowdown in economic growth. According to Investor’s Business Daily, the yield on HYLB on September 30, 2018, was 6.05 per cent in the worst case scenario. So, even if the economy goes sideways for the next few months, the investor can buy high yield ETFs and cut off later. HYLB too offers a cheaper way (expense ratio: 0.2 per cent) to get diversified access to the assets.
With ETF trading, the investors will be able to diversify their investment portfolio at a considerably lesser risk. The ETFs track baskets of assets, indices, and commodities and trade similarly like stocks on a stock exchange.
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