Fixed Income ETF

Although the way ETFs work in different ways around the world, there are some common elements that are universal. The first element is that an ETF must be listed on the stock market and it would need the ability to be traded on an ongoing basis, unlike mutual funds that are similar in nature but are finite. It is an investment plan whose value is proportionate to the value of the assets which the ETF is comprised of and it is recognizable by the way in which values are assigned. The moniker “ETF” is actually an abbreviation or shorthand expression for Exchange Traded Fund which should make it obvious that it must be traded on the market exchange! Before understanding what a fixed income ETF is, you should have a basic concept of ETF’s in general.

ETF Models
As a general rule of thumb, an ETF is modeled after certain elements on the stock exchange. Some of these models would include DIAMONDS Trust, Standard & Poor’s 500 Index Depository Receipts and iShares S & P 500. However, an ETF can also be modeled after certain markets such as technology or automotive while other models try to replicate specific commodities such as natural gas, gold, silver or oil. When choosing which ETF to add to your portfolio as an investment product it might be wise to understand the different models so that you can choose the product that you feel would be the best investment for you.

Exchange Traded Funds are Open Ended
Keep in mind that ETF’s are not finite even though products within the fund may expire at any particular moment in time. At this point, other investment products are added to the fund in place of those being sold or expiring. Unlike options, ETF’s do not expire at a specific time, even though you may choose to sell your shares at any given time. They are both created as well as managed by large financial institutions and perhaps even a financial information service that either monitors the performance of the entire bond market or a segment thereof. Therefore, throughout time, as funds are added and let go, your fixed income ETF may be comprised of different financial products at different times. It is quite fluid as you can hold on to it as long as you desire, again, unlike options that must be sold or allowed to expire at a predetermined time.

Key Features of ETF Shares
One of the identifiable features of ETF shares that differ from other types of funds is that they are traded on a stock exchange rather than being sold through a sponsor of a fund. Secondly their shares change throughout the day, unlike funds that are only priced once per day. They can be traded at literally any time of the day while fund shares can only be traded at the end of the market day. Investors in ETF shares only pay a brokerage commission when traded as opposed to funds where there are sales charges and other fees which are assessed when entering or exiting the fund.

One of the key advantages that many investors appreciate about ETF’s besides from the monthly income they receive as long as they own their shares is the fact that they don’t need to keep as close tabs on the market as they would when owning actual shares in commodities. A fixed income ETF is managed by a large financial institution that buys, sells and holds stocks and commodities as they see fit based on their analysis of the market. There is a complete listing of fixed ETF investment products online so that you can research each company before choosing which of them you feel most comfortable buying shares from.

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