Top Nav


What Are ETFs?

The term ETF is short for Exchange-Traded Fund – a security that tracks an index, commodity or basket of stocks. An ETF is somewhat similar to an index fund except that shares of an ETF trade just like a stock on a stock exchange, so they can be bought and sold very easily. ETFs are valuable investment tools because, unlike mutual funds, they can be traded throughout the course of a day.

Most ETFs track indexes. For example, the SPDR S&P 500 (NYSE: SPY) tracks the Standard & Poor’s 500, while PowerShares QQQ (NYSE: QQQ) tracks the Nasdaq-100.

ETFs can be appealing to investors for several reasons:

ETFs allow investors to sell short, buy on margin, and purchase as little as one share at a time

With lower management fees, ETFs are less expensive than mutual funds

ETFs can efficiently help diversify an investor’s portfolio

ETFs allow people to invest in a specific industry

ETF gains aren’t taxed as heavily as those earned through mutual funds

Downsides to ETFs are that, like stocks, they typically have to be bought through a broker; some countries have limited ETF markets; and they aren’t all necessarily designed for long-term investors. While not for everybody, ETFs are a good way for investors to diversify their portfolios at a low cost.

To browse through a comprehensive list of ETFs, visit Yahoo! Finance’s Exchange-Traded Fund Center.

Strike Price Offer

The Strike Price is your leading resource for insight into the world of options trading. Chief options analyst Andy Crowder will guide you through the best options strategies—telling you exactly where he's putting his money, and how you can make safe, reliable gains from some simple options trades. Your FREE subscription also includes Andy’s report "The One Vital Rule for Every Options Trade"—which reveals the #1 rule to achieve a high win-rate in every options trade.
You've successfully subscribed, click the link in your email to confirm your subscription.
There was an error, and you have not been subscribed, please try again.