A type of investment fund traded on the stock exchange like a stock, allowing investors to buy and sell during the entire trading session without having to wait for the end-of-day net asset value. Most ETFs have a passive strategy that consists of replicating equity indices, making them substitutes for index funds. They can be classified as physical ETFs, those that replicate indices by buying all the securities that compose them, or synthetic ETFs, those that replicate indices by using derivatives. ETFs offer advantages for the average investor, such as easier calculation of performance and reduced fees compared to a mutual fund. They are taxed as stocks, which is less favorable for individual taxpayers as they do not allow tax-free transfers.
« Back to Glossary IndexETF (Exchange-Traded Fund)
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