An exchange traded fund (Exhanged Traded Fund - ETF) is a type of security that involves a collection of securities - such as stocks - that usually accompany an underlying index, although they can invest in any number of industry sectors or use various strategies . ETFs are, in many ways, similar to mutual funds; however, they are listed on exchanges and ETF shares are traded throughout the day like any stock.
A well-known example is the SPDR S&P 500 ETF (SPY), which is benchmarked by the S & amp; P 500 Index. ETFs can contain many types of investments, including stocks, commodities, bonds or a mix of investment types. An exchange traded fund is a negotiable security, which means which has an associated price that allows it to be easily bought and sold. ETFs typically offer low expense rates and less brokerage fees than buy the shares (or any other security) individually.
An ETF is a type of fund that holds several underlying assets, rather than just one as a stock. As there are several assets in an ETF, they can be a popular choice for diversification.
An ETF can hold hundreds or thousands of shares in various sectors or it can be isolated in one sector or specific sector. Some funds focus only on US offers, while others have a global perspective. For example, bank-facing ETFs would contain shares in several banks in the sector.
Types of ETFs
There are several types of ETFs available to investors that can be used for income generation, speculation, price increases and to partially protect or offset risk in an investor's portfolio. Below are several examples of the types of ETFs:
Bond ETFs can include government bonds, corporate bonds and state and local bonds - called municipal bonds.
- Sector ETFs track a specific sector, such as technology, banks or the oil and gas sector.
- Sector ETFs track a specific sector, such as technology, banks or the oil and gas sector.
- Currency ETFs invest in foreign currencies, such as the euro or the Canadian dollar.
- Inverse ETFs try to make gains from falling stocks by selling short shares. Short selling is selling a stock, expecting a drop in value and repurchasing it at a lower price.
