Exchange Traded Fund

Exchange Traded Fund (Also known as ETF)

An Exchange Traded Fund is a mix between a stock and a mutual fund. The purpose of an ETF is to replicate the stock market, while having the advantages of a fund. ETFs are portfolios that follow a particular group of assets. A fund manager looks after the portfolio. In a sense, you are buying from the market itself, but purchasing many securities in one transaction. Exchange Traded Funds trade exactly like stocks. The price of ETFs are changing throughout the day and can be bought and sold at anytime of the day. You can sell short, buy on margin, hold the ETF long term etc. Just like a stock! Unfortunately, you will pay a commission to your broker for each transaction. Overall the Exchange Traded Fund has many of the benefits of stocks and mutual funds. The ETF is not trying to out-perform the index like a mutual fund, but replicate it instead.

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