What is exchange traded fund?

An Exchange-Traded Fund (or ETF) is an investment vehicle traded on primary exchanges, much like major stocks or bonds. An ETF represents a collection or 'basket' of assets such as stocks, bonds, or futures. Institutional investors are allowed to redeem shares of the ETF for shares of the underlying asset or, alternately, exchange shares of the underlying asset for shares of the ETF. This creation and redemption of shares enables institutions to engage in arbitrage and causes the value of the ETF to track the aggregate value of the underlying assets. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500.

An ETF takes the form of a collective investment scheme and trades on a securities exchange at prices closely related to its net asset value. An ETF thus combines the valuation feature of a mutual fund or unit investment trust with the tradability feature of a closed-end fund. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs were traditionally index funds but by 2008 the U.S. Securities and Exchange Commission had authorized the creation of actively-managed ETFs.[1]

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What is the difference between a "closed end" and "indexed" exchange traded fund (ETF)?

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What is the cost involved in trading (buying or selling) an ETF(Exchange Traded Fund)?

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What's the difference between a mutual fund and an exchange traded fund?

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What would be the one best exchange traded fund to own in my portfolio?

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