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Exchange-Traded Funds - Exchange-Traded Funds

An exchange-traded fund (ETF) is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. By owning an ETF, you get diversification as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

Common ETFs


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RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Index ETF

    Exchange-traded funds that follow a specific benchmark index ...
  3. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  4. Stock ETF

    A security that tracks a particular set of equities, similar ...
  5. Redemption Mechanism

    Refers to how market makers of exchange traded funds (ETF) can ...
  6. Bond ETF

    A type of exchange-traded fund (ETF) that exclusively invests ...
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    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
  3. What types of fees are incurred by purchasing ETFs?

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  4. What advantages do exchange-traded funds have over mutual funds?

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  5. Why don't mutual funds trade like stocks?

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  6. Do ETFs pay capital gains?

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