Sample Essay

Exchange traded funds came about in 1993 and since that time investment in open ended mutual funds has been gradually replaced by ETFs due to higher tax efficiency as the after tax returns are much higher on ETFs and secondly due to ease of investment and trading (Poterba & Shoven, 2002).

Exchange traded funds offer various advantages over open ended mutual funds which include continuous trading throughout the day, no minimum investment requirement, traded on several exchanges like NYSE, NASDAQ and AMEX and no redemption charges on early withdrawals (ETF Guide, 2009). These advantages make ETFs more attractive to investors and they shift from open ended mutual funds to ETFs which implies that the future of ETFs is much brighter than open ended mutual funds.

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