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Definition of 'Index ETF'
Exchange-traded funds that follow a specific benchmark index as closely as possible. Index ETFs are much like index mutual funds, but whereas the mutual fund shares can only be redeemed at one price daily, the closing net asset value (NAV), index ETFs can be bought and sold throughout the day on exchanges. Through an index ETF, investors get exposure to a large number of securities in a single transaction. Index ETFs can cover U.S. and foreign markets, specific sectors, or a specific class of stock (i.e. small-caps, ADRs, etc.) but all incorporate a passive investment strategy, only making portfolio changes when changes occur in the underlying index.
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Investopedia explains 'Index ETF'
Index ETFs may occasionally trade at slight premiums or discounts to the fund's NAV, but any differences will quickly be ferreted out through arbitrage by institutional investors. In most cases, even the intraday prices will correlate rather precisely to the actual value of the underlying securities. Additional options are available such as leveraged ETFs or short ETFs, which will have a compound or inverse response, respectively, to the underlying index. Index ETFs can be found based on most of the major indexes such as the Dow Jones Industrial Average, the S&P 500 and the Russell 2000.
Costs are comparable to the cheapest no-load index mutual funds as measured by the expense ratio, but investors will typically have to pay standard commission rates for ETF trades. Mutual fund commission rates are typically lower than for exchange-traded securities.
Index ETFs can be set up as either grantor trusts, unit investment trusts (UITs) or open-ended mutual funds, and will have slightly different regulatory guidelines as a result. Most index ETF shares can be traded with limit orders, sold short and purchased on margin.
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Search results for 'Index ETF'
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http://www.investopedia.com/articles/exchangetradedfunds/08/ETF-pairs-trade.asp
... Investors who want to play the future flow of money between asset classes
can exploit this pattern with index ETF pairs trading. ...
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http://www.investopedia.com/articles/exchangetradedfunds/09/IPO-ETF-risks.asp
... Google was the top performing company in the IPOX-100 index when the IPOX-100
ETF was launched, but exceeded the 1,000-day limit in 2009. ...
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http://financialedge.investopedia.com/financial-edge/1111/ETFs-For-The-Buy-And-Hold-Investor.aspx
... Market Vectors Long Municipal Index ETF Municipal bonds have the benefit of
being free of federal, and sometimes state and local, taxes. ...
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http://www.investopedia.com/articles/optioninvestor/10/etf-options-v-index-options.asp
... The key point here is simply to remember to analyze the actual level of option
trading going on for the index or ETF you wish to trade. ...
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http://www.investopedia.com/articles/exchangetradedfunds/11/etf-or-imf.asp
Index Mutual Fund Or ETF: Which Is Right For You? February 04 2011 | Filed
Under ยป 401K, ETFs, Mutual Funds. While similar in many ...
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http://www.investopedia.com/ask/answers/04/021904.asp
... However, as an ETF's price depends on the forces of supply and demand (which change
with the movement of the underlying index), an ETF might not track the ...
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http://www.investopedia.com/articles/mutualfund/06/foreignETFs.asp
... stock ETFs. For example, iShares MSCI Brazil Index ETF(EWZ) has more than
50% of its assets in commodity-related stocks. From 2002 ...
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http://www.investopedia.com/articles/exchangetradedfunds/08/index-debate.asp
ETF success relies on the index with which it's paired. ... An ETF that tracks
this index is Rydex S&P Equal Weight (NYSEARCA:RSP). ...
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http://stocks.investopedia.com/stock-analysis/2011/Ride-This-ETFs-Momentum-Into-2012-And-Beyond-DVY-AGG-LO-LMT-VFC1223.aspx
The iShares Dow Jones Select Dividend Index ETF had a strong 2011 and
is likely to carry this momentum into 2012 and beyond. ...
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http://www.investopedia.com/articles/mutualfund/05/activepassive.asp
... given index. The index ETF has nothing to fear by disclosing the holdings,
and price parity serves everyone's best interests. (For ...
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