Critically examine the following: ETFs are a rapidly growing class of financial products.

Answer 6(b) True. ETFs as a variety of mutual fund first became available in 1993. It represents a basket of securities that are traded on the exchange. ETFs select a market index and make investments in the basket of stocks drawn from the constituents of that index. The fund may invest in any or all of the stocks constituting that index but not necessarily in the same proportion. It is similar to index mutual funds but they are traded more like a stock and have more flexibility than index mutual fund. It is very popular because it can be bought and sold throughout the trading day. Hence, it allows intraday trading which is rare with mutual funds. Traders have the ability to short or buy ETFs on margin. Low annual expenses hence cheapest mutual fund and it is more tax efficient.