Investing Capital Mutual Fund Essay

Pages: 6 (2055 words)  ·  Style: Harvard  ·  Bibliography Sources: 8  ·  File: .docx  ·  Level: College Senior  ·  Topic: Economics

SAMPLE EXCERPT . . .
Exchange traded funds have disadvantages such as: Since ETFs may not track a broader accepted index; they may bring higher risk and higher cost. In case an individual is making repeated purchases over time or a Dollar Cost Averaging, then ETFs may not prove to be cost effective, mainly due to the commissions that are usually associated with purchasing ETFs. As opposed to selling stocks, it may be difficult to sell EFT whenever you feel to especially if EFT tend to be a thinly traded issue or when there is high volatility in the market, (Deutsche Bank, 2009).

Tracking the Index

Generally fund manager will buy shares within companies that give them hope of beating the relevant index, which may be All-Share or FTSE. Meaning that, their aim is to achieve returns that are better as compared to the wider stock market. Although as they do so, majority of them pick the wrong stocks making their fund to underperform the market, (Patrick Collinson, 2010). On the other hand index-tracking funds will always try to track the performance of the index in particular but not set out to beat it. The reason behind is that they are certain that finally, there will be no traditional manager who manages to do better as compared to the index for longer time, and this makes more sense for literally tracking of the index. This depends on the funds. Some of the trackers will buy shares within every company that forms the index, (Associated Newspapers Ltd., 2012). For some, they will use complex financial instruments in tracking what the index does through taking part in buying shares in a cross -- section of companies.

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Conclusion

Growth of ETFs is important since they act as flexible investment tool that are capable to be used in different ways which investor and an advisor can determine. However, investments will always be prone to risk, for instance investments in bonds may be subjected to interest rate, inflation, and credit risks. Therefore, when choosing an investment, past performance of an investment does not guarantee a future performance. Moreover, index performance does not also represent the exact investment since an individual cannot directly invest in an index.

Essay on Investing Capital Mutual Fund Investing Assignment

References

Abacus Consulting Services, (2009). "Advantages and Disadvantages of Mutual Funds." Retrieved July 22, 2013 form http://chinese-school.netfirms.com/abacus-mutual-funds-advantages.html

Andrew Chan, (2011). "Exchange Traded Funds: Advantages and Disadvantages." Retrieved July 22, 2013 from http://www.boston.com/business/personalfinance/managingyourmoney/archives/2011/02/exchange_traded.html

Associated Newspapers Ltd., (2012) "A guide to cheapest tracker funds." Retrieved July 22, 2013 from http://www.thisismoney.co.uk/money/investing/article-1583915/A-guide-cheapest-index-tracker-funds.html#ixzz3Hj6CZcfY

CAF Partnerzone, (2013). "Active vs. passive investing: which is right for your charity?" Retrieved July 22, 2013. http://www.guardian.co.uk/voluntary-sector-network-caf-partner-zone/active-passive-investments-charities

Deutsche Bank, (2009). "A 10 Step Guide to Exchange Traded Funds" db x- trackers ETFs.

Dr. David Costa, "Investing Efficiently through Funds and ETFs," The Portable Private Banker. (2011)

Farlex, "Investment Vehicle," (2012). Retrieved July 22, 2013 from http://financial-dictionary.thefreedictionary.com/Investment+Vehicle

Harp Sandhu, (2011). "Active vs. Passive Investing: The Pros and Cons of Both," Retrieved July 22, 2013. http://www.seniorlivingmag.com/articles/active-versus-passive-investing

Marotta Asset Management, (2006). "Advantages and Disadvantages of Exchange Traded Funds (ETFs)." Retrieved July 22, 2013 http://www.freemoneyfinance.com/2006/09/advantages_and_.html

Patrick Collinson, (2010). "Index tracking funds trump manager returns." Retrieved July 22, 2013. http://www.guardian.co.uk/money/2010/apr/17/index-tracking-funds [END OF PREVIEW] . . . READ MORE

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"Investing Capital Mutual Fund."  Essaytown.com.  July 23, 2013.  Accessed December 4, 2020.
https://www.essaytown.com/subjects/paper/b/investing-capital-mutual-fund/8592125.