Unlike traditional and active mutual funds, exchange traded funds have a simple elegance that allow investors to efficiently capture a specific or broad market segment.
When managing an ETF, providers keep their funds’ holdings and value of the holdings in line with the indices that they try to mimic, reports Ari I. Weinberg for the Wall Street Journal.
“It’s pretty simple, really,” Hao-Hung (Peter) Liao, Portfolio Manager for Van Eck’s Market Vectors ETFs, said in the article.
The ETF vehicle requires less hands, compared to their index and actively managed mutual fund counterparts. A single manager or small team can oversee a large number of ETFs. For example, 87% of Van Eck’s ETF assets are tied to the 38 funds managed by Liao and a staff of three portfolio managers and analysts.
Instead of buying or selling the underlying securities to meet orders, authorized participants, or market makers, and brokers to facilitate trades. [How to Effectively Execute ETF Trades]