What is an exchange-traded fund?
ETFs represent shares of ownership in either a fund, a unit investment trust, or a depository receipt that holds portfolios of common stocks or bonds. These portfolios closely track the performance and dividend yield of a wide variety of specific indices which include broad markets, industry sectors, international markets and fixed incomes. The idea behind ETF’s was simple but brilliant: issue exchange tradable securities representing a broad basket of investments. The first one, Spiders (SPDR), designed to emulate the S&P 500, was issued in 1993.
An exchange-traded fund (ETF) is a basket of securities that trades on an exchange like a stock. In the event you don’t know how the stock market works, shares of public companies trade at various prices based on demand. The distinguishing factor with an ETF is that, rather than representing ownership in a single company, it tracks an index such as the S&P 500 or Dow Jones Industrial Average. The price of an ETF, similar to a basket of stocks in a mutual fund, will vary based on the performance of its underlying holdings. If an ETF represents an index with thirty different companies and all of them are trading up on a given day, the offering price of the ETF will move up accordingly.* A good starting point for better understanding this important and relatively new investment product is to view their advantages against investments which could be utilized by a similar audience. Mutual funds are the investment product most analogous to exchange-traded funds which can be used as a benchmar
An exchange-traded fund (ETF) is an investment company with shares that trade intraday on stock exchanges at market-determined prices. Investors may buy or sell shares of an ETF through a broker or in a brokerage account, just as they would the shares of any publicly traded company. There are a number of different ETFs on the market currently, including “Cubes” (Nasdaq-100 Trust), SPDRs, sector SPDRs, MidCap SPDRs, HOLDRs, iShares, and Diamonds. All of them are passively managed, tracking a wide variety of sector-specific, country-specific, and broad-market indexes.
