Published Fri, 16 Mar 2018 04:56:03 -0400 on Seeking Alpha
For the inaugural edition of ETF Month, please click here.
During "ETF Month", I plan to survey a number of ETFs that have a lot of followers on Seeking Alpha, but for some reason don't have much coverage on the site. Hopefully, this will improve the visibility of Cambridge Income Laboratory and draw more members to our service, allowing me to make the newsletter better than ever. I will also be taking ETF suggestions, so do let me know if you have any ETFs on your horizon.
What are the advantages and disadvantages of ETFs (exchange traded funds) versus CEFs (closed end funds)?
Most ETFs are passively managed. The advantage of this is lower fees compared to CEFs, which are actively managed. The disadvantage is that a passive fund will simply buy everything in the index, indiscriminately. ETFs with nearly always trade close to their net asset value [NAV]. The advantage of this is that one does not have to worry about premiums or discounts. The disadvantage is that one does not have the opportunity to buy funds at a discount, nor to exploit the concept of premium/discount mean reversion. ETFs usually do not employ a managed distribution policy, in other words, they pay out as dividends what they receive as income from their underlying investments. The advantage is that one doesn't have to worry about an ETF overpaying from its earnings, leading to destructive ROC. The disadvantage is that ETFs are generally lower yielding than CEFs. ETF Month #2: ETRACS... Read more
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