11) Exchange-Traded Funds: Conclusion

by · October 16, 2010

Exchange-Traded Funds (ETFs) today have been extended to track any index available such as fixed income, industrial sectors, global investments, commodities and currencies, and investment styles. They have progressed a long way from tracking only broad market stock indexes.

As the name of the fund suggests, an ETF trades on a stock exchange very much like a regular listed stock in the market. It has similarities to a mutual fund too, such as the pooling of investments from different investors or the use of professionals to manage the funds. However, unlike mutual funds, ETFs are  often passively managed. An index fund most closely resembles an ETF. The goal of an ETF is to match the index it follows as closely as possible.

For an investor new to ETFs, it is advisable to evaluate the many options and strategies available prior to investing into it, in order to make sure the right one is chosen according to their interests.