Monday, January 14, 2008 5:29 PM
What is an Exchange Traded Fund (ETF)?
There are so many acronyms in investing it can start to look like alphabet soup. But E, T, and F are three letters you should know. It’s a hybrid of a mutual fund and stock because it’s set up like a fund that tracks the performance of an index, but it’s also traded daily like a stock. So how is that helpful to you? First off, you’re not locked in for a certain time period as you are with a mutual fund -- you can buy and sell anytime but you will pay a commission as if you were working with an individual stock. But unlike buying shares of a solo stock, it’s a less risky option because you’re automatically diversified thanks to all of the stocks that make up the fund.