ETF stands for Exchange Traded Fund.  An ETF is basically a mutual fund that can be traded any time of the day in contrast to a normal mutual fund which must be traded at certain times of the day (sometimes at the end of a trading day).  Because the ETF is structured differently than a mutual fund they can also have reduced trading fees associated with them in contrast to other investments.  ETF’s often are matched to a market index such as the Standard & Poor’s 500.  The investment houses who may buy ETF shares and if they choose to may actually trade them in for the underlying shares that the ETF represents.

I don’t have experience with ETFs myself but compared to a traditional Mutual Fund they’re definitely appealing to me.  The any time trading means that you as an investor could cut losses in a market shift in contrast to letting a ‘killer day’ wipe out any gains the ETF may have earned for you.  I would definitely recommend talking to a financial adviser about the advantages of an ETF fund in contrast to a mutual fund - it could save you a lot in trading fees and increase your sense of control (and thus reduce some risk).

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This entry was posted on Sunday, September 9th, 2007 at 5:53 pm and is filed under What is a.... You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. No tag for this post.