What is an Exchange Traded Fund, index mutual funds, Diamonds Trust Series I, Fixed income exchange traded securities, Holding company depository receipts, iShares, StreetTracks, State Street Global Advisor ETFs       What is an Exchange Traded Fund, index mutual funds, Diamonds Trust Series I, Fixed income exchange traded securities, Holding company depository receipts, iShares, StreetTracks, State Street Global Advisor ETFs

What is an Exchange Traded Fund?

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What is an Exchange Traded Fund?

Exchange Traded funds are similar to index mutual funds, but they are traded like stock. As the name suggests, Exchange Traded Funds represents a basket of securities that are traded on an exchange.

Types of Exchange Traded Funds

ETF Type ETF Name Tracks
DIAMONDs Diamonds Trust Series I Dow Jones Industrial Average
FITRs Fixed income exchange traded securities Various treasuries (including 1, 2, 5 and 10-year)
HOLDRs Holding company depository receipts Narrow industry groups. (Each initially owns 20 stocks)
iShares iShares Group of ETFs marketed by Barclays Global Investors
QUBEs Nasdaq-100 tracking stock (QQQ) Nasdaq-100 index
Spiders Standard & Poors' Depository Receipts (SPDRs) Track a variety of Standard & Poors' indexes
StreetTracks StreetTracks - State Street Global Advisor ETFs Various indexes, including Dow Jones style indexes and Wilshire indexes
VIPERs Vanguard Index Participation Receipts Several Vanguard index funds


Advantages of Exchange Traded Funds:
  • ETFs can be bought and sold throughout the trading day.
  • Traders have the ability to short or buy ETFs on margin.
  • Low annual expenses rival the cheapest mutual funds.
  • Tax efficiency - ETF tend to beat out mutual funds when it comes to tax efficiency.

Disadvantages of Exchange Traded Funds:
  • Commissions - trading exchange traded funds will cost you.
  • ETFs can be bought through a broker
  • Unlike mutual funds, ETFs don't necessarily trade at the NAV of their underlying holdings, meaning an ETF could potentially trade above or below the value of the underlying portfolios.
  • Slippage - difference between the price at which you want to buy or sell, and the price you actually get.

See also

What are Exchange Traded Funds?

What is an ETF?


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