A pool of funds that are traded on an exchange (no need to go through a broker) and often mimic an index of stocks, but at a lower price.Example: SPDR
Exchange Traded Funds
A pool of funds that are traded on an exchange is known as an Exchange Traded Fund (ETF). ETFs are securities that track the performance of a particular index, commodity, or a basket of assets.
Investors can buy and sell ETF shares on an exchange like a stock without needing to go through a broker. This provides investors with the flexibility of trading throughout the day, real-time pricing, and the ability to place limit orders and stop-loss orders.
One of the most popular ETFs is the SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500 index. The ETF purchases all the stocks in the index proportionately and mirrors its returns. This allows investors to gain exposure to the entire US equity market with just one investment.
ETFs not only offer ease of trading but also provide diversification, transparency, and lower expense ratios compared to mutual funds. They are a popular choice for investors looking for a low-cost, passive investment strategy, or a building block for a diversified portfolio.
More Answers:
Accounting Entry for Purchase Payment with Discount: A Step-by-Step Explanation for Social Science Students.Balancing Debits and Credits: A Step-by-Step Guide to Ensuring Accurate Financial Statements in Accounting
Understanding Investment Funds: Types, Objectives, and Trading Restrictions