Fundamentals and Models of Exchange traded Fund system

An Exchange Traded Fund or commonly known as an ETF is a form of marketable security that aids to track bonds, any particular commodity or an index. They can be traded on a stock exchange making it popular among individual investors. It is different from mutual funds as mutual funds are not open for trading in the stock exchange while ETFs can be openly traded within the stock exchange. The price of the ETF keeps changing on a daily basis and at times even on an hourly basis.

What are the basis fundamental characteristics of ETF?

The ETF fundamentals state that it is a marketable security that can be traded in a stock market through the normal processes. The price of an ETF changes throughout the day as an investor can buy and sell it at his expense. They are a highly liquid asset which can be easily converted to cash making is very popular among individual investors who deal with such investments. They come a low fees which is another reason of its popularity. It does not have a fixed Net Asset Value since it can be traded like stock. An ETF basically owns the shares of stock, gold bars, bonds etc. which are the underlying assets. This is then divided into shares. The investors do not own the asset directly, they can be called the indirect owners of the underlying assets. In case of liquidation they receive a residual value as deemed from the asset. In general conditions they are entitled to interest or dividend paid. Since the trading of ETF takes place on the public stock exchange they can be easily purchase, sold or even exchanged.

What are the different models of ETF?

There are 7 distinct ETF models as illustrated below. These help investors to manage their finances in a much compact manner and helps to get good returns on them.

1. The Global Equity Model concentrates on growth of capital and is based on the Global ETFs which works on the global font.
2. The Short Duration Fixed Income model helps to invest Fixed Income ETFs. They have a low period of duration risk hence lower credit risk.
3. The Global Fixed Income Model deals with the highest index.
4. The Global Multi-asset Income model gives a very high combination of interest income and dividend earned.
5. The Funds Model or the Hedge Fund Model deals mostly with mutual funds that are risk managed.
6. The Private Equity Model helps to grab securities from the private market for equity.
7. The Real asset Model seizes securities with high correlation to inflations and any other tangible assets.

The ETF models are based on strategies given by reputed strategists who have vast experience in this field of investment. Based on these models investors can invest their funds in ETF related investments in order to get high returns. The strategies can also be used to make more unique strategies for individual investors as the requirement of each investor is different.