ETF Portfolio Recommendation Assignment
Exchange-Traded Funds: An Introduction The iShares definition of ETF is as follows:
“An exchange traded fund (ETF) is an investment vehicle that combines key features of traditional mutual funds and individual stocks. Like index mutual funds, ETFs represent diversified portfolios of securities that track specific indexes. Like stocks, they can be bought and sold (long or short) on an exchange throughout the trading day. In addition to trading flexibility, key ETF benefits include instant diversification, tax efficiency and transparency of cost and holdings.”
The Eurozone:
With the official declaration of the Euro in 1999, the single currency bound several countries in a pact that would see them grow together. However, with the affiliation of some high risk coun tries and ventures with the Euro, borrowing became cheaper. As an example, Greece was paying around 8.5% to borrow before the formation of the EU in 1999. By 2003, however, it was securing funds at 4.3%. As a result, excessive borrowing and leverage ensued, which worked well with increasing growth seen in the region up until 2008. At this time, growth had curtailed, and these countries, that had previously borrowed and leveraged a substantial amount of funding, had to kee p up with the repayments to their debtors. With an allowable limit to borrowing of 60% of GDP, it is evident that none of these nations were in par with the set policy. Without the option of cheap borrowing to sustain growth, which was the norm before 2008, and with amassing obligations to creditors, the only viable option left was to increase output by increasing productivity. This, however, is easier said than done. There exists a stark contrast between the highly productive Northern Europe, which are net exporters, and the less productive Southern Europe, which are net importers. Hence, due to the fact that these countries import more than they export, they had deficits that would require attention.
What the future
“An exchange traded fund (ETF) is an investment vehicle that combines key features of traditional mutual funds and individual stocks. Like index mutual funds, ETFs represent diversified portfolios of securities that track specific indexes. Like stocks, they can be bought and sold (long or short) on an exchange throughout the trading day. In addition to trading flexibility, key ETF benefits include instant diversification, tax efficiency and transparency of cost and holdings.”
The Eurozone:
With the official declaration of the Euro in 1999, the single currency bound several countries in a pact that would see them grow together. However, with the affiliation of some high risk coun tries and ventures with the Euro, borrowing became cheaper. As an example, Greece was paying around 8.5% to borrow before the formation of the EU in 1999. By 2003, however, it was securing funds at 4.3%. As a result, excessive borrowing and leverage ensued, which worked well with increasing growth seen in the region up until 2008. At this time, growth had curtailed, and these countries, that had previously borrowed and leveraged a substantial amount of funding, had to kee p up with the repayments to their debtors. With an allowable limit to borrowing of 60% of GDP, it is evident that none of these nations were in par with the set policy. Without the option of cheap borrowing to sustain growth, which was the norm before 2008, and with amassing obligations to creditors, the only viable option left was to increase output by increasing productivity. This, however, is easier said than done. There exists a stark contrast between the highly productive Northern Europe, which are net exporters, and the less productive Southern Europe, which are net importers. Hence, due to the fact that these countries import more than they export, they had deficits that would require attention.
What the future