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 ?
Simply put, exchange-traded funds are open-ended mutual funds that are listed and traded on a stock exchange.
A new batch of exchange-traded funds are focusing on companies involved with the fight against cancer.
25, 2015 /PRNewswire/ -- Invesco PowerShares Capital Management LLC ("Invesco"), the managing owner and commodity pool operator of the funds, has resumed accepting orders for Authorized Participants to purchase new Creation Baskets in the PowerShares DB exchange-traded funds.
com/research/d6x6n7/the_100_best_excha) has announced the addition of F W Media's new book "The 100 Best Exchange-Traded Funds You Can Buy 2012" to their offering.
The Web site provides comprehensive information to help educate individual investors and investment professionals when investing and trading using exchange-traded funds.
Other new ETFs on the horizon, he said, were exchange-traded funds that tracked bonds, regional and global portfolios and companies in industry sectors.
Fiduciary/Claymore MLP Opportunity Fund ("FMO"), Madison/Claymore Covered Call & Equity Strategy Fund ("MCN") and the Claymore-advised exchange-traded funds listed below (the "ETFs" and, collectively with FMO and MCN, the "Funds") are pleased to announce that the proposals applicable to each of the Funds and listed below received necessary shareholder approval at the reconvened Joint Special Meeting of Shareholders held on February 2, 2010.
The Claymore-advised exchange-traded funds listed below (the "ETFs") are pleased to announce that the proposals applicable to each of the ETFs listed below received necessary shareholder approval at the reconvened Joint Special Meeting of Shareholders held on March 12, 2010.
ETC's ETF-in-a-Box(TM) Solution is a turnkey platform that provides time-sensitive and cost-effective methods to bring an exchange-traded fund to market.
19, 2014 /PRNewswire/ -- Global X Funds, the New York-based exchange-traded funds, today announced the scheduled liquidation of the following two funds ("Funds"):
We see fixed income strategies, including those tailored around pension fund liabilities, alternatives, and exchange-traded funds as key areas for investment innovation and growth in 2007.