What are Exchange Traded Index Funds?
An exchange traded index fund is an index fund that trades like a single stock. Until the development of the ETF, this was never before possible. An ETF is a passively held basket of stocks that reflects the composition of an index, like the S&P 500, Russell 2000, or the Nasdaq 100. The ETF’s trading value is based on the net asset value of the underlying stocks that it represents and the spread between the bid and asking price. Think of it as a index mutual fund that you can buy and sell in real time at a price that changes throughout the day. Of course, this is only of value if investors can predict the future direction of indexes. Unfortunately, there is a mountain of academic research that indicates this is an impossible task due to the random nature of the news that moves all markets and the efficiency of which that news is incorporated into asset prices. Therefore, the only logical and prudent investment strategy is to buy a risk-appropriate and efficient portfolio of indexes and
