Get to know ETF (Exchange Traded Fund) Mutual Funds & Their Advantages.

Exchange Traded Fund or ETF is a type of mutual fund in the form of a collective investment contract that is traded on the Stock Exchange. Understand more here. So far, we know mutual funds and shares as two different types of investment instruments. Shares are an instrument in the form of ownership of a company. Meanwhile, mutual funds represent ownership of securities. However, the fact is that mutual funds can also be traded as shares, ETF is the term for calling them. An ETF or Exchange Trade Fund is a collection of valuable assets, bonds and shares that are sold in one package. Like a basket containing various fruits, by buying an ETF mutual fund you can have a variety of investment instruments at once. To understand more about exchange trade funds, see the complete discussion about what ETFs are, their advantages and how to buy them below.

WHAT IS ETF ?
ETF is a mutual fund in the form of a collective investment contract (KIK) or a collection of investment instrument contracts to be traded widely on the Stock Exchange. If you generally buy mutual funds at banks or securities companies, you can buy ETF mutual funds freely on the stock exchange, of course at prices that follow the supply-demand forces of investors. Even though an ETF is an instrument that you can buy on the stock exchange, the characteristics of the mutual fund collection in it are still tied to the Investment Manager (MI) when the mutual fund purchase is first agreed upon. Simply put, an exchange traded fund is an investment instrument with ties to MI, but freely transferable to other investors on the exchange.

Differences between ETFs and Ordinary Mutual Funds
After knowing what an ETF is, next you need to know the difference between exchange traded funds and ordinary mutual funds. Broadly speaking, there are 5 aspects that make ETF mutual funds and general mutual funds very different, namely:

1.Where to Buy
The first difference between regular mutual funds and ETFs is where they buy and sell. When you want to buy general mutual funds, you need to contact MI, a securities company, or another mutual fund sales agent. Meanwhile, when buying an ETF, you can directly contact the investor who owns the ETF or the dealer on the stock exchange.
2.Minimum Purchase
The next thing that shows the big difference between mutual funds and ETFs is the minimum purchase limit. When buying mutual funds, the purchase calculation is per 1 unit of asset. Meanwhile, the nature of exchange traded funds is the same as ordinary shares, namely they are sold with a minimum valuation value of 1 lot or 100 shares.
3.Transaction Fees
The third difference between mutual funds and exchange traded funds is in terms of transaction costs. When buying and selling mutual funds, you need to pay MI of at least 1 - 3% of the total value of your mutual funds. It's different when you buy and sell ETFs. You only need to pay commission fees according to your agreement with the broker.
4.Risk
When compared to ordinary mutual funds, ETF mutual funds are instruments that have less risk. When you buy general mutual funds, you need to entrust the security and transaction performance completely to MI. Meanwhile, when investing in exchange traded funds, you can always control the performance of the instrument as long as the exchange hours are still active.
5.Price
The final difference between regular mutual funds and exchange traded funds is the final price determination. In the capital market, the determination of mutual fund prices - whether increases or decreases - can only be known at the end of the exchange's working hours. Meanwhile, because exchange traded funds are like shares, the price can also be known in real-time according to the volume of transaction demand during active exchange hours.

Exchange Traded Fund Working Mechanism
The process of buying and selling exchange traded funds is a transaction supervised by three institutions at once, namely OJK, BEI, and KSEI. So even though its nature is more like shares, KSEI as the mutual fund supervisor is still responsible for supervising ETF transactions on the stock exchange. In terms of buying and selling, there are two ways investors can take to get ETF mutual funds. The first way is through MI or Participating Dealer specifically for exchange traded funds (Primary Market). Meanwhile, the second way to buy ETF mutual funds is through a direct broker (Secondary Market).

thank you for reading this page, if need more information about ETF , you can read from this link : https://en.wikipedia.org/wiki/Exchange-traded_fund

happy learning all of you .