ETF Definition

The definition of ETF is an exchange traded funds which is traded on the stock exchanges. Similar to a stock, however the majority of ETF’s track a stock index rather than a particular stock. Many investors like to trade in exchange traded funds because they allow you to invest in a basket of assets while still trading like a stock. Since an ETF does not carry a normal stock related net asset value, they are instead calculated exactly like a mutual fund. This means you can purchase an ETF at the end of each trading day for its net asset value.

However only large trading institutions are usually allowed to blog or sell ETF shares direct from a fund manager. The average investor will need to purchase them from a retail broker or trade shares on the aftermarket. Holding ETF stocks can give you diversification of your portfolio as well as allowing you to purchase as few as one share, sell short, or bought on margin.

 

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