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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. Exchange-Traded Mutual Funds

    Investopedia explains the definition of exchange-traded mutual ...
RELATED FAQS
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    Discover the extremely far-reaching range of investment asset classes that are available to investors through exchange-traded ... Read Answer >>
  3. In what ways are ETFs more tax efficient than mutual funds?

    Compare mutual funds and exchange-traded funds to find out which one offers the most advantageous tax position for investors ... Read Answer >>
  4. Who's in charge of managing exchange-traded funds?

    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 >>
  5. What is the difference between exchange-traded funds and mutual funds?

    Exchange-traded funds, or ETFs, are similar to mutual funds because both instruments bundle together securities to offer ... Read Answer >>
  6. What types of fees are incurred by purchasing ETFs?

    Understand all the various costs, both explicit and hidden, involved in trading exchange-traded funds, or ETFs, and see how ... Read Answer >>

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