by KYW's Salil Gutt
There are some 800 different types of exchange traded funds allowing investors to invest directly in something as esoteric as global water resources or in a basket of stocks in say Brazil.
ETF's have been around for about 15 years and have become a significant tool for investors. An ETF is an index of the investments it mirrors. They trade like stocks and so help investors control the timing of capital gains or losses unlike mutual funds where investors have no control of the timing or the extent of gain or loss recognition.
Sales have boomed but their success has spawned a problem. Manufacturers of ETF' s are dreaming up newer and newer themes and some so way out that there are not enough companies who play in that pond. Some ETF's are serious accidents waiting to happen as they may be bulked up by tiny companies which are very thinly traded.
The point here. If you are buying an ETF be sure to do your homework. The best course of action is to focus on large ETF's and don't plunge into weird sounding investments just because your advisor likes it.
E-Mail Story
Print Story
