According to the Wikipedia definition, an Exchange Traded Fund (ETF) is:
An investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.
A few tidbits about ETF’s:
- Apparently, there are four types of ETF’s: Index, Commodity, Actively Managed, and Exchange Trader-grantor trusts.
- ETFs trade on an exchange. Each transaction is subject to a brokerage commission.
- ETFs are structured for tax efficiency and can be more attractive than mutual funds.
- Since ETFs trade on the market, investors can carry out the same types of trades that they can with a stock.
- Well known companies such as Vanguard and Fidelity offer ETF’s.
- For more information on ETF’s visit CNN Money’s page about them.
Do you have any ETF’s or plan to invest in them in the future?