Howdy. Could someone explain to me what these ETFs are? How does it work exactly? Thank you in advance. dRYER923
ETF is an abbreviation for an exchange-traded fund, which is a type of open-ended investment fund designed to track the movement of stock indices, raw materials or a basket of other assets such as shares or bonds. This distinguishes it from traditional investment funds, which aim to beat the market and achieve a better result than major stock indices.
Seemingly such a strategy may seem unreasonable, but statistics show that in reality it is often more profitable than active strategies that rarely actually beat the market.
Like other securities, ETFs are listed on the stock exchange. When buying ETFs, we invest in a diversified portfolio of assets from companies gathered in an index. The fund's participation titles are subject to current stock market valuation, hence we are able to continuously track investments and buy and sell them during a session through a brokerage.
Exchange-traded fund (ETF) - is an investment fund whose at least one unit or class of shares is traded throughout the day in at least one trading system and with at least one market maker who takes steps to ensure that the value of the units or shares in the trading system does not materially differ from their net asset value and, where applicable, from their indicative net asset value.
Their purpose is to faithfully reproduce the indicated index.
Until now (until the change in US law in 2008) ETFs were only index funds, managed algorithmically (which results in low costs).
ETF is a stock exchange fund. ETFs operate essentially in the same way as other funds, e.g. popular investment funds intended for the general public, and additionally their shares (stocks) are traded on the stock exchange.
However, classic funds are not traded on stock exchanges. It usually takes several days to join or leave an investment fund.
ETFs are flexible and liquid thanks to stock exchange trading. Every time you decide to sell shares, you can do so on the stock exchange through your broker and the funds will be transferred immediately.
to your account. ETFs therefore eliminate the need to wait for your money, which occurs
for investment funds.
ETFs are usually index funds. An index fund imitates indices, i.e. it allows you to invest in the same securities of which an index is composed in the same proportions.
For this reason ETFs are currently perceived as the most important instrument of passive investment.
ETF is an acronym for Exchange Traded Fund, which means a listed fund. ETF is a fund using a passive investment strategy, which means that its task is to map the behavior of a specific benchmark, which may be, for example, a stock index, raw material or a basket of specific shares. To put it simply, the ETF's task on the American S&P500 index, for example, is to achieve the same results as the underlying index - if S&P500 has recorded an annual growth of 15%, the value of the fund's investment certificate at the same time should also gain about 15% and similarly in case of declines. ETF therefore offers the possibility to conveniently invest in index companies with one instrument and provides very similar rates of return. Unlike actively managed funds, where a specialized team of analysts is looking for ways to beat leading stock indices, ETFs aim to achieve exactly the same result as the broad market. Interestingly, history shows that in the long run, actively managed funds have very little chance of overcoming their passive counterparts, which reproduce the rates of return of leading stock indices.