Exchange Traded Fund

Exchange Traded Fund (ETF). Sometimes misspelled as Exchange Trade Fund. Definition of ETFs, and why they are usually better investments than mutual funds.

Exchange Traded Funds Definition

What are ETFs? They are an increasingly popular alternative to mutual funds. They are similarly funds used to buy and sell equities, but are different in that they are actively traded on the regular stock exchanges themselves.

What is ETF

ETFs are a good way for you to get exposure to different markets. They are convenient and inexpensive; you can easily view ETF holdings online through Yahoo Finance.

However, a possible downside is that unlike mutual funds, ETFs are not actively managed. Your holdings will thus tend to move directly with the market.

Types of Exchange Traded Funds (ETF)

Index ETFs are exchange traded mutual funds set up to track the major indices. Examples include the Standard & Poor’s 500 Depository Receipts (SPDR) and the NASDAQ 100 Index (QQQ) exchange traded mutual funds. Index ETFs are hardly managed and available at very low costs totally at most 0.20 percent per year.

Sector ETFs are exchange traded mutual funds that track specific industry sectors. These funds will be a little more actively managed than Index ETFs, as the professional investor will select the largest or most important stocks that will become part of the sector ETF. ETFs are easy to understand, convenient and inexpensive. Thus, they are increasingly popular.

Return from Exchange Traded Fund to American Mutual Funds