Exchange traded fund

Also found in: Dictionary, Thesaurus, Acronyms, Encyclopedia, Wikipedia.
Related to Exchange traded fund: index fund

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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
* The number of exchange traded funds will more than double to 2,500 by 2017.
The SPDR Exchange Traded Fund (ETF), SPDR S&P Metals and Mining ETF (NYSE:XME) declared on Saturday that it received a payment of USD158,483 as an authorised claimant from a class action settlement related to Molycorp Inc, formerly traded on the New York Stock Exchange under ticker symbol (NYSE:MCP) before filing for bankruptcy in June 2015.
Exchange Traded Concepts LLC and and Master Income ETF serves as the investment advisor of the exchange traded funds, distributed by Quasar Distributors LLC, which is not affiliated with Exchange Traded Concepts LLC or any of its affiliates.
The Desjardins Exchange Traded Funds are not guaranteed, their value fluctuates frequently and their past performance is not indicative of their future returns.
US-based electronic market maker GTS has closed the acquisition of the Exchange Traded Funds and wholesale market making businesses of financial services firm Cantor Fitzgerald, the company said.
Summit-based ETFMG Alternative Harvest ETF MJ issued by ETF Managers Group, a group family of exchange traded funds announced it will sponsor Ultimate Fighting Championship heavyweight Alexey Oleynik.
Satyendra Pathak Doha Listing of Qatar Aluminum Manufacturing Company (Qamco), two exchange traded funds (ETFs) and increasing foreign ownership limit (FOL) in listed stocks made Qatar Stock Exchange (QSE) the most sought after stock market in the region in 2018.
BANKING AND CREDIT NEWS-January 16, 2014--RBC Global Asset Management launches 4 exchange traded funds
Summary: Morocco's parliament will probably approve a law this year that allows the nation's bourse to list real estate investment trusts, or Reits, and exchange traded funds, or ETFs, the managing director of the exchange said.