 Hello everyone, this is financial author Amit Don of Iran Journal. Today, I'll talk about what is an ETF or exchange traded fund and the advantages or disadvantages of an ETF. An ETF is a type of investment product that trades on an exchange like a stock. However, unlike a stock, an ETF is not made of a single entity. An ETF is made of a group of investments. These groups can be a group of stocks, bonds, natural resources, commodities, precious metals, and so on. In most cases, an ETF follows an index as an index is already made of a group of stocks or other investment products. Advantages of ETFs. Lower cost. The ongoing cost of holding ETFs called management expense ratio or MER is lower than mutual funds or index funds. For example, an ETF MER can be in the range of 0.25% to 1% or even it can be 0.10%. However, a mutual fund MER can cost in the range of 1 to 3%. Flexibility. ETFs offer more flexibility as they trade on the stock exchange and can be bought or sold throughout the day during regular trading hours. However, mutual funds do not offer this option as they can be transacted using the NAV or net asset value which comes out at the end of the day. Diversification. As ETFs are made of a basket of varieties of investments, they provide broad diversification and convenience. It would be time consuming, a lot of hassle, and almost impossible to get the same level of diversification with anything else. You see what you get. A major advantage of holding ETFs is that at least you get the return of the underlying index or stocks the ETF is tracking. You know what you're getting and you see what you get. With mutual funds is totally different. In general, regular mutual funds are made of many individual stocks or other types of investments and most of the time you'll have a hard time seeing what you're getting. Easier asset allocation. ETFs let you easily manage asset allocation as you're able to see your entire ETFs in one place which is your trading account and thus track and manage asset allocation easily. Low maintenance. ETFs allow you to hold a broad range of indexes with minimal supervision. Studies show that experienced ETF investors beat most professional fund managers with a fraction of time and with much less effort. Now I'll talk about the disadvantages of ETFs. Requires investment knowledge. Buying ETFs is not as easy as mutual funds. You need to have a trading account and need to be some sort of investment savvy to hold ETFs. Brokerage fees. Buying ETFs incur brokerage commission or trading fees just like stocks. You pay fees to buy and sell. This makes buying ETFs for smaller amounts not justifiable. No dollar cost averaging. Since ETFs incur fees each time you buy and sell it's not a good vehicle for dollar cost averaging. Market timing. Since ETFs are easy to trade it may tempt investors to do market timing or buy and sell to chase returns. We are frequent trading and thus incurring lots of transaction fees which are not good for other investors who are holding that ETFs. ETFs work best for long-term investors. For more about ETFs please visit www.arancharnal.com. That's all for today. Thank you.