Five Keys to investing in ETFs
October 13th, 2010
In a delicate moment in the equity markets, investors do not hesitate to go hunting for new forms of investment and profitability. In this context, ETFs or exchange-traded funds have become a good alternative. Lyxor Asset Management highlights the key to understanding this type of product, in the words of Juan San Pio, head of institutional investor ETF Lyxor Asset Management, is “a simple way to invest anywhere in the world with a maximum risk of 10 %. “
Thus, the five basic points to operate ETFs are:
1. What are ETFs, are investment funds that replicate indexes and publicly traded. The ETF is a hybrid between an action and a bottom, so this product has the advantages of both investment products. They secured intraday liquidity and can be bought and sold throughout the trading session, the price is known at all times, can pay dividends and offer the contract to account values.
The ETFs, due to their product contributions, have the same tax treatment as the actions: their yields are considered changes in equity. Yields are included in the base of savings and are taxed at 19% the first 6,000 euros and the remaining 21%. Also they are not subject to deferral regime for investment funds.
2. History and issuers of ETFs: In the 80 start to U.S. trading financial products on baskets of stocks, while in Europe have to wait until 2000, when there is the launch of the first European exchange-traded funds. In Spain, the year of entry of the ETFs is 2006.
Currently, worldwide there are more than 2,280 ETFs and more than $ 1.1 trillion in assets under management. In the Old Continent, exchange-traded funds are over 960 and more than 170,000 million euros under management. In Europe, the top three fund managers by assets under management are iShares, Lyxor ETF Db x-trackers.
3. ETFs Features: Unlike traditional mutual funds, ETFs are more transparent and it is important to take into account the rate at which replicates the ETF. Is the index in charge. Thus, the liquidity of an ETF is dependent on the liquidity of the securities that comprise each index.
4. Selecting ETFs: When selecting an ETF, you have to take account of the management fee and fork. Thus, it is better the lower the management fee, while the fork is the one showing the value liquidity (the liquidity of an ETF is not determined by the trading volume).
5. Strategies with ETFs: In the market for ETFs, a wide variety of options: ETF Sector and Style, Emerging Markets ETF, Money Market ETF, fixed income ETF, ETF and ETF Commodity Alternative.