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 throuhout that 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 mutual fund does.
By owning ETF, you get the diversification of an index fund as well as the ability to sel short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for 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.
One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.
Source: http://www.investopedia.com/terms/e/etf.asp
No comments:
Post a Comment