WHat is an ETF (exchange trade fund) and is it better than Mutual Funds?

About how much money can you make if you invest in ETFs?

There are two types of etfs. One is an index fund. The other is what is commonly known as a closed end fund. Index funds attempt to mimic certain stock indexes. Their key points are low expenses and passive investments. They are very tax efficient since they do not have large realized capital gains that they have to distribute at year end. They have become very popular recently. The reason is that most mutual funds under perform the stock market in general.

Closed end funds are similar to mutual funds. They are mutual funds in practice but they have one or two very large differences. They do not trade at net asset value. They may trade at a premium or more importantly at a discount, sometimes as much as 15% or perhaps more. They have a fixed amount of capital to invest unlike mutual funds that have a constant inflow and outflow of money to manage. This can be a big advantage for several reasons. First they tend to not have billions that they have to invest, only hundreds of millions. That is a far easier task. They also do not have to keep a cash reserve for redemptions. Finally, many are leveraged with prefered stock which can magnify returns (and losses). A couple of of closed end funds have been in existance since before 1929. GAM is one of them. No mutual funds have been in existance for so long.

an exchange traded fund usually mimics a stock index for a given sector. the fund is weighted with the different stocks in the sector to produce the same result. you can make money off of one the same way you do with mutual funds. some etf's pay dividends just like some mutual funds. if i knew how much money you could make, i wouldn't be on yahoo answers. i have 3 mutual funds and one etf. all have averaged over 7.5% return over the past 3 years. Not a blistering return but better than being negative.

An ETF is a mutual fund, but the stocks inside the basket are passive. Somebody isn't buying and selling shares. Also since it's just a big basket of stuff (bonds, stocks, gold, silver) and you are just buying a bit of the basket, you don't have to pay internal taxes when somebody sells their shares as what happens in a traditional mutual fund. Also ETFs can be traded as stocks (some even can be shorted), but mutual funds can only be bought and sold at the price at the end of the day. They can even have a stop in the trade unlike mutual funds. So there is more protection from loss (price drop and internal taxes that you don't see on your statement but are there) and a way to profit from a loss (the short) with ETFs. Most traditional mutual funds can't beat the SP500 over the long haul which is represented by the ETF SPY.

How much can you make? They are usually buy and hold, but I have one ETF that went from about $6 to $45 in just over 3 years, but I bought it at $19 and now it's $41 in 2 years.

Normally a mutual fund can be bought & sold at the fund house based on its Net Asset Value (NAV). In case of ETF, the fund can only be bought/sold in the stock exchange, where the price is decided by the demand & supply like a share. Sometimes you get a ETF at discount to its NAV and if you hold it till redemption date, you get it redeemed at NAV resulting in better return than normal a MF.

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1) Visit the Wikipedia.
2) No.
3) Billions.