Exchange Traded Funds: How Do They Work

Key Take Away:

What are Exchange Traded Funds (ETFs) and why are they becoming so popular?  Over the course of this webinar, you'll discover how these funds work, the benefits of their low management fees, and what makes them different from other investment funds

Overview:

With the increasing popularity of exchange-traded funds (ETFs), the market is seeing institutional investors, consultants and individual investors alike using them for a wide range of portfolio purposes thanks to their transparency, liquidity, and the access they offer to a broad range of asset classes.

In a nutshell, the purpose of this webinar is to explain what they are, how they compare to individual stocks and mutual funds, and how they work. It’s the first of a series of webinars that outline their characteristics, benefits, the breath of investment strategies they facilitate, but also the systematic risks they could pose to those who use them without thoroughly understanding them.

This webinar and subsequent ones draw on my experience as (i) a professor of finance who uses ETFs in various finance courses and included on a worldwide list of seventeen “ETF friendly professors” compiled by Yahoo finance, (ii) an author of three ETF books, (iii) a researcher who penned 25 ETF research articles, and (iv) an ETF speaker who has been invited to talk about them for the past 16 years at professional conferences as a guest speaker, panelist, moderator and keynote speaker.

Why Should You Attend:

This webinar is conceived for starting out or experienced investment professionals interested in using ETFs as part of their investment strategies. This ETF webinar will provide knowledge and perspectives that can help you formulate informed investment decisions. The complexities and certain myths surrounding ETFs will be sorted out for those seeking to put them to work in their portfolios.

The live session will also benefit academics seeking to include ETFs in their research agenda and CPA’s, CFA’s and CFP’s who are turning their attention to this unique breed of investment products.

Areas Covered In This Webinar:

What exactly are ETF?
ETFs are portfolios of holdings across a variety of asset classes. In addition to broad-based asset class exposure, they also allow investors to take advantage of global opportunities almost anywhere in the world including hard reaching areas like frontier markets. ETFs are listed on intraday trading exchanges and can be bought and sold throughout the day.
How do they compare to individual stocks and mutual funds?
ETFs are investment funds that share the characteristics of both individual stocks and mutual funds. Just like stocks, they trade real time (intraday) on an exchange. Mutual funds, on the other hand, are priced only at closing and cannot be traded intraday. ETFs also share the characteristics of index funds since they aim to replicate the performance of the index they track minus fees.
What do they do?
They don't try to beat the market; they try to be the market. Most aim to replicate the performance of the index they passively track minus fees. Investors can do just about anything with an ETF that they can do with a normal stock. If an investor wants to buy stocks in Russia, he could simply buy an index ETF mimicking the Russian stock market but traded on a U.S. exchange rather than risking putting funds into Russia directly.
What benefits do they offer?
Broadly speaking, the benefits they offer fall into five main categories:
Transparency: investors are able to know what they own every single day
Liquidity: ETFs can be traded at any time the market is open. This gives them the ability to be sold and bought quickly, easily, and at a reasonable transaction cost.
Cost effectiveness: ETFs are cheap because of their passive nature.
Flexibility: ETF can make changes to their portfolios whenever they desire.
Diversification: ETFs allow investors to construct a portfolio of creative holding across asset classes such as stocks, bonds, commodities, real estate, and currencies. They can also go global with ETFs.
Manage downside risk: Unlike mutual funds, investors don’t need to worry about being stuck in a rapidly deteriorating position. ETFs allow them to implement a portfolio protection plan by placing automatic stop losses.
Execute investment strategies: ETFs allow investors to execute a trade that is desirable on either buy or sell side of the transaction.
Tax efficiency: The manager can effectively reduce the fund’s tax burden by handing off the shares with the lowest possible tax basis
How about the cons?
Commission: Commission for those who invest small amounts in ETFs can be prohibitive.
Spreads: In addition to commissions, investors also pay the “spread” when trading ETFs. The larger the spread between the bid price and ask price, the larger the cost of trading ETFs
Premiums and discounts: ETFs can trade above net asset value (at a premium) or below net asset value (at a discount). Never buy at a premium and sell at a discount.
What exactly is the creation and redemption mechanism?
The creation/redemption process further enhances our understanding how ETFs work. Some refer to it as the secret sauce of ETF. It’s what allows ETFs to work.

Learning Objectives:

• Understand what an ETF is
• Understand their differences with mutual funds counterparts
• Understand their benefits but also their risk.
• Understand what they do
• Understand how they work

Who Will Benefit:

Investment professionals seeking to further/refine their understanding of these products.

Email: [email protected] 
Toll Free: +1- 844-414-1400
Tel: +1-516-900-5509

Speakers Profile:

Seddik Meziani
Seddik Meziani is a tenured professor of finance at Montclair State University, NJ, former chair of the Department of Economics, Finance, and Real Estate, and the Soliciting Editor of The Journal of Index Investing. He is also an ETF author, consultant and speaker. He holds a doctorate in managerial economics from Rensselaer Polytechnic Institute and an MBA in finance and international business from New York University.

His expertise covers exchange-traded funds, micro- and small-caps and emerging/frontier markets. He is extensively published in both academic and practitioner research journals and has given numerous presentations on a variety of topics related to his research interests at national and international conferences. He is the author of three ETF books: Exchange-Traded Funds as an Investment Option (Palgrave-Macmillan/2006), Exchange-Traded Funds: Conceptual and Practical Investment Approaches (Risk Books/ 2009) and Exchange-Traded Funds: Investment Practices and Tactical Approaches (Palgrave-Macmillan/ 2016). His extensive work on ETFs was acknowledged on a worldwide list of “Seventeen ETF Friendly Professors” compiled by Yahoo Finance.

He is frequently quoted by media on ETF topics and speaks regularly at industry conferences as a panelist, moderator, conference chair, and keynote speaker both in the United States and internationally since 2000. He has developed and presented a series of professional seminars to various US and international corporate and governmental entities, including comprehensive educational workshops on ETFs in New York, London, Rome, and Muscat, Oman. He is an independent trustee at GraniteShares, an exchange-traded fund company and a member of the Research Advisory Board of ETF Global, LLC, an independent ETF advisory firm.

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