ETF is the acronym for Exchange-Traded-Fund. So it is like a mutual fund in nature. It holds assets such as stocks or bonds like mutual fund. But it is tradable on stock exchange like stocks. You can buy and sell it real time the same way you buy and sell stocks.
ETF is traded at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Its price is real time price. That is the main reason I like ETF over mutual fund. From online broker such as eTrade or your bank’s online investing system, you can preset the price you want to buy or sell. You know for sure that’s the price you are willing to accept. Whereas for mutual fund, it is valued at the end of the trading day, so you don’t know the unit price at the time you place the order. You will know the price the next business day. You will get more or less of what you want.
There are many ETFs these days, most of them are tracking indexes, again, like index mutual funds. Some of them are tracking major well-known indexes such as Dow Jones Industrial and S&P 500, others are tracking sector indexes, such as financial, resources, etc. Somebody says whenever there is an index, there is a ETF tracking it.
It is a great invention of the rule of money game!
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