Reviewed by Aug 26, 2020| Updated on
Index exchange-traded funds (ETFs) look at replicating and tracking a benchmark index. The index ETFs are traded on the stock exchanges.
Understanding Index ETF
Since index ETFs invest in numerous stocks and securities, the investors, therefore, get exposure to several stocks and securities in making just one transaction. The performance of these funds largely depends on how well the index a particular index ETF is tracking.
The fee structure of index ETFs can be compared to the cheapest mutual fund that has no load as measured by the expense ratio. However, investors are generally charged with the standard commission rates on trading ETFs. It is typically charged when a sale or a buy order is placed, though most brokers provide a wide range of commission-free ETFs. The index ETFs provide cheaper expense ratios and lesser commissions for brokers when compared to buying individuals stocks. Highlights of index ETF:
Factors to consider before you invest
- The gains made by the index ETFs would depend on the performance of the underlying index.
- Index ETFs can be purchased and redeemed anytime in the trading hours.
- You get exposure to a wide range of securities by investing in index ETFs.