Click or copy and paste the link: http://finance.yahoo.com/news/wild-trading-exp

Question

Click or copy and paste the link:

http://finance.yahoo.com/news/wild-trading-exposed-flaws-etfs-031400489.html

to the website bar then read the article and answer both questions in two paragraphs with 5 sentences inclding APA in-text citations and then APA references from the sources that are use including from this article and other articles related to the topic.

Discussion Topic 1B

PART 1:

Use the information you've read here to answer the following questions:

1) Would YOU invest in an ETF over a mutual fund?

2) What type of person invests in either an ETF or a mutual (describe common characteristics)

You may need to do some research outside of this article. Don't forget to properly cite.

Explanation / Answer

Answer:

1) The preference of investing in an ETF or a Mutual Fund depends a lot on the perception, duration of investment and risk taking capabilities of an investor. If we analyse for a long term investment then we can see that more less the growth under the investment options shall be quite similar except for the transaction cost. However, ETFs provide an opportuinity to earn more or vice versa in the short run with associated risks. Both have their own pros and cons; below here is a comparitive analysis of ETFs, Open Ended Mutual Funds and Close Ended Mutual Funds:

On the basis of charateristics as depicted above, his own perception and his risk taking capabilities; the investor can choose whether to invest in ETFs or in Mutual Funds. According to me one shall always diversify his investments by investing in different available ptions.

2) Usually the investors who are risk takers and seek fast growth by taking the benefits of intra day changes in stock values will prefer to invest in ETFs, whereas the investors who are comparitively less risk takers or planning to earn some constant growth over a long period of time shall prefer investing in Mutual Funds.

Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund Fund Size Flexible Fixed Flexible NAV Daily Daily Real Time Liquidity Provider Fund itself Stock Market Stock Market / Fund itself Sale Price At NAV plus load, if any Significant Premium / Discount to NAV Very close to actual NAV of Scheme Availability Fund itself Through Exchange where listed Through Exchange where listed / Fund itself. Portfolio Disclosure Monthly Monthly Daily/Real-time Uses Equitising cash - Equitising Cash, Hedging, Arbitrage Intra-Day Trading Not possible Expensive Possible at low cost

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