What Are ETFs (Exchange-Traded Funds)?
Exchange-Traded Funds, or ETFs, are basically like mutual funds that trade on stock exchanges, with a few important differences. This gives them many of the benefits of stocks while removing some of the disadvantages that mutual funds have. Purpose of ETFs Have you ever wanted to trade shares of an index like the Dow Jones Industrial Average or the S&P 500? Well, you can’t do that directly but you can do it indirectly through ETFs. The managers who run ETFs usually invest in the same stocks or futures that make up an index or commodity in an effort to make the ETF’s value per share track a certain index or commodity up and down. This allows anyone with access to stock trading the ability to easily trade indexes or commodities indirectly. Example: SPY – SPDR Trust Series I: One of the most popular ETFs, its goal is to track the price and performance of the S&P 500 index. It will not be the same price as the index but its chart should have the same shape as the index, within one or two p
