The differences between exchange traded funds (ETFs) and holding company depository receipts (Holdrs) have many aspects. They both are structured similar to a mutual fund as they hold a basket of securities and they both are traded constantly during market hours, earn dividends and can be shorted. However, Marie Beerens in Investor’s Business Daily explores some of their differences.
Holdrs composition is fixed and does not change unless there is a corporate event, whereas an ETF rebalances to its underlying index. For this reason, ETFs charge a fee, where Holdrs do not. Holdrs’ investors have direct ownership of each share in the trust, which gives them voting rights. An investor of Holdrs can cancel for a small fee and receive underlying shares, and if he doesn’t sell the individual stocks, he will not be taxed on capital gains.
ETFs can be traded in odd lots and investors can vote only on corporate matters related to the issuer.
While there are some differences, it is still important for an investor to know what is they are buying and make sure it fits with their portfolio and goals.
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