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What is an exchange traded fund?


What is an exchange traded fund?

They are mutal funds traded on the stock exchange like other stocks. They have been around for a long time, since the 1920s. Currently, there are two types. Exchanged traded index funds and closed end funds. The main difference is that exchange traded index funds add to their their investment capital as new money flows into the funds. Closed end funds have an initial public offering and then do not issue any more stock so there is a fixed amount of capital that is invested.

Here is a link to learn more about each type and another link that specifally addresses closed end funds. They are both excellent.

Definition: What is an ETF? In short, they are similar to index mutual fundsbut are traded more like a stock. As their name implies, Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an exchange. As with all investment products, exchange traded funds have their share of advantages and disadvantages.

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