ETF's (A better alternative to Mutual Fund)

I had indicated in my previous post that mutual funds are good instruments to invest when you don't have time and energy to invest via stocks. There is a lot of research that you have to do when you are investing in stocks. Not that you don't in case of mutual funds but you have someone in charge to make sound decisions for your fund. A fund manager. Anyhow this post is not about stocks or mutual funds.

Its about a third option when you want to a buy a lot of stocks but don't have money to buy all at the same time and also you want to diversify. So what you do you look for an ETF. In simple language ETF is everything (check details) a mutual find is except you can trade an ETF like a stock and is not as expensive as a Mutual Fund.

So benefits of ETF's in nutshell are:
1: Lower Costs: Most ETF's do not have 12b-1 fees.
2: Buying and Selling Flexibility: Buying and Selling can happen on Stock Market at any time just like stocks.
3: Tax efficiency - ETFs generally generate relatively low capital gains, because they typically have low turnover of their portfolio securities. While this is an advantage they share with other index funds, their tax efficiency is further enhanced because they do not have to sell securities to meet investor redemptions.
4: Market exposure and diversification - ETFs provide an economical way to rebalance portfolio allocations. An index ETF inherently provides diversification across an entire index. ETFs offer exposure to a diverse variety of markets, including broad-based indexes, broad-based international and country-specific indexes, industry sector-specific indexes, bond indexes, and commodities.e.g. If you want to invest in India an ETF like IFN would be a great way to start (I have invested in IFN)

I found it an effective way to invest in BRIC (Brazil, Russia, India, China) and India only. You can invest in any number of way on any number of index's and gain maximum advantage out of it.

Hope you enjoy this post.

Thanks,
Sumeet