Why have ETFs grown so popular so quickly? What advantages do ETFs have over open-ended index funds?

Ans. ETF stands for Exchange Traded Fund. ETF have grown popular so easily because it is a type of fund that holds multiple assets rather than just one like in case of stock. An ETF can own hundreds of stocks of different companies or can eb confined to a particular company. Also people prefer ETF because it becomes very easy to buy and sell the funds and there is no minimum amount to invest as well which attract many poeple. We can say that on the whole it has many advantages due to which it has grown so quickly.

Advantages over open ended indexed funds

1. Trading flexibility : Open ended funds can be traded only once per day after the market has closed but ETF can be traded throughout the day till the markets are open.

2. Lower cost : The operation costs of ETF are very low as compared to that of open ended indexed fund.

3. Diversification : One ETF can give exposure to large number of stocks at the same time which is not the case with open ended funds.

4. Immediately reinvested dividends : The dividends are immediately reinvested in case of ETF whereas the exact timing for the open ended index funds is not really known.