Exchange-Traded Funds

An exchange traded fund, or ETF, offers many of the same benefits as a mutual fund, but without as many fees. However, an ETF is not considered to be a mutual fund, and in some ways can be better than an ETF

The technical part of how an ETF works is somewhat complicated, but for now, you can think of them as being similar to mutual funds. The biggest difference between an ETF and a mutual fund is that a mutual fund is only bought and sold at the end of the day, based on the current market value. An ETF, on the other hand, can be bought and sold throughout the trading day. This opens up more options for strategies such as short term trading.

An ETF, like a mutual fund, generally tracks some specific type of investment. Originally, they would track something like the S&P 500 and would be periodically adjusted to reflect the value of the S&P 500. However, in recent years, they have branched out and now cover numerous other areas, including bonds, commodities, and even foreign currency.

Pros of ETFs.  ETFs are a great way to diversify your holdings when you don\’t have very much money. This makes them a good choice for small investors. Also, because they can be traded throughout the day like stocks, they are more open to different trading strategies.

Cons of ETFs.  One of the major concerns regarding ETFs is that they are relatively new and untested. It is still unclear how they perform over the long term. Perhaps more importantly, however, is if they are fair.

ETFs have been the target of some criticism because of how they might be affecting the markets in general. Some have accused the major banks of using ETFs to manipulate the markets for their own profit. Whether or not this is true  appears to be mostly speculation at this point, and to my knowledge, there has been no formal investigation into the matter.

Buying an ETF is easy. If you already have an account to buy stocks, you can frequently research and buy ETFs through the same account.