Frequently Asked Questions About Exchange-Traded Funds socalled ETF’s
What is an exchange-traded fund or ETF?
An exchange-traded fund, or ETF, is an investment product representing a basket of securities that track an index such as the Standard & Poor’s 500 Index. ETFs, which are available to individual investors only through brokers and advisers, trade like stocks on an exchange.
How does an ETF differ from an index mutual fund?
Index mutual funds also track baskets of securities. Unlike index funds, which are priced once after the end of each trading session, ETF prices change throughout the day because they’re traded like shares. Like shares, they can also be sold short — a bet that the index value will decline — and bought on margin using borrowed money.
What are the advantages and disadvantages of ETFs versus mutual funds?
Exchange-traded funds charge lower fees than actively managed mutual funds and offer investors a wide range of sectors, geographies and strategies.
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