Exchange traded fund


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Exchange Traded Fund

Similar to an index mutual fund, these tracking stocks trade continuously. Two popular ETFs are the Standard and Poor's depositary receipt (SPDR) launched in 1993 and the NASDAQ-100 Index Tracking Stock (QQQ) which was launched in 1999. These vehicles are popular for hedging as well as investment.

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).

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 ?
As a result of this partnership, both exchanges introduced the NEXT FUNDS NASDAQ-100A; EXCHANGE TRADED FUND in Japan.
24, 2014 /PRNewswire/ -- Exchange Traded Concepts ("ETC"), the private-label ETF advisor recognized for bringing to market exchange traded funds on behalf of their clients through a complete turnkey solution, is pleased to announce the surpassing of $2 billion in assets as of this week.
Furthermore, the risks and burdens bore by investors seeking to put their money in exchange traded funds are generally less".
The bank said that the value of Canadian exchange traded funds has increased to more than CAD40bn in less than 20 years, but only a few Canadian investors were familiar with them.
Exchange Traded Funds (and iShares) are actually index funds that trade like individual stocks.
BGI manages 65% of the world's 100 largest pension plans3 and is the leader in assets and products in exchange traded funds through its iShares[R] brand with more than 180 ETFs globally.