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 ?
The first was Seligson's Special Mutual Fund OMX Helsinki 25 Exchange Traded Fund.
ProShares selected JPMorgan to provide a full range of custody services because they have the people, technology and experience to help us make the launch of ProShares Exchange Traded Funds a success," said Michael Sapir, CEO of ProShare Advisors LLC.
NEW YORK -- The American Stock Exchange(R) (Amex(R)) today launched trading in ETF Advisors' fixed-income trust receipts -- FITR(TM) Exchange Traded Funds (ETFs).
SAN FRANCISCO -- Barclays Global Investors (BGI), a worldwide leader in exchange traded funds (ETFs), announced today that the second phase of iShares products, 15 iShares Funds, will move to the NYSE Arca, a national securities exchange and a subsidiary of the NYSE Group, on October 20, 2006.
com) will be the sole source for companies included in the PowerShares Cleantech Portfolio (Symbol: PZD) exchange traded fund (ETF), that was launched today.
About Exchange Traded Concepts ETC is carving out a niche as a portal to launch new, custom exchange-traded funds efficiently and cost-effectively through a complete turnkey solution.
fund to launch on the new Source ETF Trust, a dedicated Trust established and operated by Exchange Traded Concepts exclusively for Source
Exchange Traded Concepts is a private-label ETF advisor with passive and active exemptive relief from the SEC under the Investment Company Act of 1940 to launch custom domestic and international equity and fixed income exchange traded funds through a complete turnkey solution.
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.
This new section doubles the amount of stock research and includes a new Exchange Traded Fund (ETF) Center to help individual investors make smarter and faster decisions.
22, 2013 /PRNewswire/ -- Exchange Traded Concepts, LLC ("ETC") announces the launch of the ROBO-STOX(TM) Global Robotics and Automation Index ETF (Ticker Symbol: ROBO), the latest exchange-traded fund to begin trading today through the firm's accelerated, low-cost, private-label ETF platform.
As the first exchange traded fund to provide investors with convenient, cost effective access to the gold bullion market, we are pleased that GLD Shares will be the first and only ETF to offer this enhanced ability to access the broad, global liquidity of the gold bullion marketplace," said James Burton, managing director of World Gold Trust Services, LLC.