exchange-traded fund

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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.

exchange-traded fund (ETF)

A mutual fund whose shares trade on a securities exchange, generally at or very near net asset value per share. Unlike ordinary mutual funds that continually issue and redeem their own shares, exchange-traded funds are similar to closed-end investment companies whose shares trade among investors. The share price is maintained at or near net asset value because of the ability of large investors to convert ETF shares to the underlying stocks or to trade underlying stocks for shares of the ETF. See also creation unit.
Case Study The exchange-traded fund has become a very popular investment, in large part because of the low expenses and great flexibility. Annual expense ratios for ETFs are often lower than even the lowest-cost index funds. ETFs can be used either to buy or short the overall market or a specific segment of the market. These funds can also be used to hedge an investment position. For example, an investor holding a diversified portfolio of stocks can hedge an expected market decline by shorting shares of an exchange-traded fund that replicates the S&P 500. Investors with more specialized portfolios have the option of using other ETFs that track a more focused index. The market price of an ETF efficiently tracks a stock index because large investors are permitted to swap ETF shares (generally, 50,000 shares) for the underlying stocks that compose the index, and vice versa. If an ETF market price moves below its net asset value, investors will swap the ETF shares for shares of stock composing the ETF portfolio. Conversely, if an ETF market price moves above its net asset value, investors will swap shares of stock that underlie the index tracked by the ETF for shares of the ETF. The swapability of ETF shares for shares that compose the index keeps the market price of the exchange-traded fund near its net asset value.
References in periodicals archive ?
Exchange traded funds serve as open investment funds which follow the movement of specific indicators, listing and trading their supplementary documents on the stock market as shares and bonds.
listed five exchange traded funds this week, which enabled TSX to achieve this new milestone.
The number of exchange traded funds will more than double to 2,500 by 2017.
Kevin Gopaul, chief investment officer of BMO Exchange Traded Funds, said, 'Exchange traded funds offer efficient and effective access to a wide variety of asset classes and global markets, providing investors with an innovative product that meets their needs.
We are honored to have the NEXT FUNDS NASDAQ-100 EXCHANGE TRADED FUND, linked to one of the world's largest growth indexes, to be listed on OSE's market," said Michio Yoneda, President and CEO of OSE.
New issuers listing their first products on NYSE Arca in 2012 included: Exchange Traded Concepts; ArrowShares; BNP Paribas; Huntington Securities; and Pyxis.
OKLAHOMA CITY -- Exchange Traded Concepts Trust (Trust) filed a preliminary prospectus with the SEC on December 16th, 2011 to launch an innovative high income MLP ETF, the first exchange-traded fund that tracks the Solactive High Income MLP Index (Index).
Our plan to broaden the types of funds available on the ETF-in-a-Box platform is a response to the continued innovation demonstrated by investment strategists," explains Garrett Stevens, CEO of Exchange Traded Concepts.
Interested sub-advisors can utilize this turnkey service or create a customized solution with Exchange Traded Concepts.
LONDON & NEW YORK -- World Gold Council (WGC) has today announced the appointment of Jason Toussaint as Managing Director of Exchange Traded Gold (ETG), the World Gold Council's global initiative designed to promote and develop the gold Exchange Traded Fund (ETF) and Exchange Traded Commodity (ETC) market.
com Beta Web site has been launched to help investors make more informed investing choices when investing with exchange-traded funds by providing innovative one-screen views of popular exchange traded fund lists, ETF101 quick references, daily technical multi-charts, performance and relative-market ratings, forums - as well as the Web site's Top 10 ETF funds list.