Explanation of ETF
Exchange traded fund (ETFs) are also called index tracking stocks, and are similar to mutual funds in that they are a basket of stocks.
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Where are ETFs traded?
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ETFs are listed and traded on major U.S. and foreign stock exchanges.
How do you buy an ETF?
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ETFs are bought and sold via a brokerage account.
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How are ETFs like stocks?
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ETFs can be sold short. A short sell is selling a stock first at a higher price and then buying it back at a lower price. ETFs are also optionable.
Why purchase an ETF as opposed to a mutual fund?
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ETFs usually do not cost as much as a mutual fund. There are no entrance or exit fees, as there are with many mutual funds.
What are the benefits of ETFs?
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ETFs have certain benefits when compared with trading stocks; for example, they have no front- or back-load fees. There is an ETF for just about every sector of the market and for most foreign countries.
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- Photo Credit Image by Flickr.com, courtesy of Rafael Matsunaga
