AnĀ exchange-traded fundĀ (ETF) is a type ofĀ investment fundĀ andĀ exchange-traded product, i.e. they are traded onĀ stock exchanges.
ETFs are similar in many ways toĀ mutual funds, except that ETFs are bought and sold from other owners throughout the day onĀ stock exchangesĀ while mutual funds are bought and sold from the issuer based on their price at day’s end.
An ETF holds assets such asĀ stocks,Ā bonds,Ā currencies,Ā futures contracts, and/orĀ commoditiesĀ such asĀ gold bars, and generally operates with anĀ arbitrageĀ mechanism designed to keep it trading close to itsĀ net asset value,Ā although deviations can occasionally occur.
Most ETFs areĀ index funds: that is, they hold the same securities in the same proportions as a certainĀ stock market indexĀ orĀ bond market index.
The most popular ETFs in the U.S. replicate theĀ S&P 500 Index, the total market index, theĀ NASDAQ-100Ā index, the price of gold, the “growth” stocks in theĀ Russell 1000 Index, or the index of theĀ largest technology companies.
With the exception of non-transparent actively managed ETFs, in most cases, the list of stocks that each ETF owns, as well as their weightings, is posted daily on the website of the issuer.
The largest ETFs have annual fees of 0.03% of the amount invested, or even lower, although specialty ETFs can have annual fees well in excess of 1% of the amount invested.
These fees are paid to the ETF issuer out of dividends received from the underlying holdings or from selling assets.
Last Updated on 2 hours ago by pinc