An investment fund traded on stock exchanges like a stock, which allows investors to buy and sell during the entire session without having to wait for the end-of-day net asset value. Most ETFs have a passive strategy that involves replicating equity indices, making them substitutes for index funds. They can be classified as physical ETFs, those that replicate indices by buying all the underlying securities, or synthetic ETFs, those that replicate indices using derivatives. ETFs offer advantages for the average investor, such as easier calculation of performance and lower fees compared to mutual funds. They are taxed as stocks, which is less favorable for individual investors as they are not allowed tax-free transfers.
« Back to Glossary IndexExchange-Traded Fund (ETF)
« Back to Glossary Index