ETF


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ETF

Exchange-Traded Fund

A security that represents all the stocks on a given exchange. For example, an exchange-traded fund may track the Standard and Poor's 500. The organization issuing the exchange-trade fund owns each of the stocks traded on the S&P 500 in approximate ratio to their market capitalization. ETF shares can be bought, sold, short-sold, traded on margin, and generally function as if they were stocks. Investors use exchange-traded funds as a way to easily diversify their portfolios at relatively low cost. See also: SPDR.

ETF

Exchange traded fund (ETF).

Exchange traded funds (ETFs) resemble open-ended mutual funds but are listed on a stock exchange and trade like stock through a brokerage account.

You buy shares of the fund, which in turn owns a portfolio of stocks, bonds, commodities, or other investment products. You can use traditional stock trading techniques, such as buying long, selling short, and using stop orders, limit orders, and margin purchases.

The ETF doesn't redeem shares you wish to sell, as a mutual fund does. Rather, you sell in the secondary market at a price set by supply and demand. ETF prices change throughout the trading day rather than being set at the end of the trading day, as open-end mutual fund prices are.

Each ETF has a net asset value (NAV), which is determined by the total market capitalization of the securities or other products in the portfolio, plus dividends but minus expenses, divided by the number of shares issued by the fund.

The market price and the NAV are rarely the same, but the differences are typically small for the most widely traded conventional ETFs. That's due to a unique process that allows institutional investors to buy or redeem large blocks of shares at the NAV with in-kind baskets of the fund's securities or other products.

Most ETFs are linked to a market index, which determines the fund's portfolio. While the majority of the indexes are traditional, some are described as fundamental. In those indexes, components of the index are identified on the basis of selective criteria, such as their performance, rather than their market capitalization.

References in periodicals archive ?
"The ETF's net expense ratio of 0.09% matches SPY and is below the equity ETF average.
BANKING AND CREDIT NEWS-September 20, 2018-State Street Global Advisors cross lists 29 ETFs on Mexican stock exchange
The deal between Mirae Asset and Global X is expected to close in the third quarter, pending necessary third-party approvals, including certain regulatory matters and requisite ETF board and ETF shareholder approvals.
(Related: ETF Fees Are the Top Factor in Choosing Funds: Survey)
Since its inception in 2008, CSOP has demonstrated a remarkable track record with credibility and success as a leading ETF manager in Hong Kong, with 9 ETFs listed on the Hong Kong Stock Exchange including this newly launched CSOP Crude Oil ETF.
It is merely to illustrate structural differences between a mutual fund and an ETF, and to displace any preconceived notion that the latter is for trading when that is not the case at all.
On November 7, regulators at the SEC agreed to allow Eaton Vance's subsidiary Navigate Fund Solution to launch the new style of actively managed ETFs. The design will not use an IIV, instead relying on a mechanism dubbed "NAV-based trading," in which a fund's price is quoted in relation to its NAV-i.e., NAV+$.02.
Vineet Arora, head, product and distribution, ICICI Securities, says, "The ETF will offer diversification by virtue of investment across different sectors.
Meanwhile, the PSE, together with Singapore-based The Pinnacle Group International, will hold the "Philippine ETF Investment Convention" on Tuesday July 30, at the Hotel Intercontinental Manila in Makati City.
"At times, individual investors' use of ETFs is assumed to mirror overall industry ETF trends.
"The dynamics of ETFs are different from other fund types," said Liam Butler, head of ETF fund administration, Europe Middle East and Africa at Northern Trust.
Davidas Abneris (Abner 2010) savo knygoje raso, kad nors po truputi randasi ir aktyvaus valdymo modeliais paremtu ETF, absoliuti dauguma siu fondu yra skirti indeksams sekti ir atlieka i pasyvu investavima orientuotu priemoniu vaidmeni.