What are ETFs (Exchange Traded Funds)?
ETF’s is a generic phrase coined around the year 2000 for any type of stock exchange traded index type instrument. SPDR’s, QQQ’s, and Diamonds can all be classified as ETF’s since they are traded on stock exchanges. ETF’s are not traditional mutual funds offered by mutual fund companies. ETF’s typically have the same features as the AMEX traded index products explained above. Barclays now offers Ishares and Vanguard is beginning to offer Vipers as additional choices of ETF’s. I have heard that stock index funds have a great deal of unrealized capital gains. With the aging of the Baby Boom Generation, index fund redemptions will force the index fund manager to make massive stock sales which will trigger unwanted capital gains for shareholders of the index fund. Is this a valid reason to avoid index funds and choose ETFs or individual stocks instead? Although this scenario is possible, it would take preposterously large redemptions to create a big tax bill. This criticism is often pointe
