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Spot ETF as an exchange instrument – in a nutshell: what is it

Spot ETF as an exchange instrument – in a nutshell: what is it

Many people know that stocks, commodities, indices, etc. are traded on the stock exchange, but few people have heard about the ETF.

And by the way, an ETF is not NFT, although very consonant.

In a nutshell, the ETF – this is an ordinary investment fund filled with various types of liquid assets, united by some common feature, with the aim of issuing, on the basis of all this «mixture», its shares (units) and trading them on exchange.

Due to the fact that there are futures on EFT, the transactions of ETF funds carried out on the basis of the current exchange price are commonly called spot.

Based on - one ETF fund can combine shares of various companies into its assets, another fund - bonds, a third - commodities, a fourth - crypt, etc. But the bottom line is that for the total amount of all this collection (capital), the fund issues its shares and places them on the stock exchange, where any investor can purchase them in the form of a piece of this bouquet.

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A share (share) of an ETF is a security confirming the right of its owner to a certain part of the fund's assets.

The risk is certainly a noble thing, but to remain without "pants" - not every investor is ready for such a turn.

It is precisely this approach to risk assessment that has become the main prerequisite for the creation of such an exchange-traded instrument as the ETF.

ETF trading on the exchange is carried out like any other types of securities, in real time, through broker (professional market participant).

For an investor, ETF funds are attractive primarily due to the fact that they allow:

  • reduce risk (investing in one implies diversification of investment directions)
  • to carry out trades through professional market participants (brokers)
  • they make it possible to buy them even in small quantities, without the need for significant investments in specific instruments (unlike stocks or goods, where the purchase and sale is mainly carried out in lots, not units).

For example, on the Moscow Exchange of MICEX OJSC, trading is carried out in shares of such ETF funds as EQMX, SBMX, TMOS, etc. :

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It is not difficult now to understand what spot bitcoin-ETF, which is being talked about so much now, and what is its advantage in contrast to direct crypto trading (especially for non-professional participants of the exchange market).

Spot ETF as an exchange-traded instrument in a nutshell: what is it - Something like that!

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