ETF Definition | What Are ETFs?

What are ETFs exactly? Well, ETF stands for exchange traded funds. Many believe is one of the best investments you can make. Back and start moving forward.

First of all resources, in many ways, such as traditional mutual funds. ETFs are baskets of securities funds, which are selected Money Manager is a team of analysts or computer software.

Just as mutual funds specialize in certain investments and activities. If you get a small cap ETF, because it is a basket of small businesses.

There are indications that the track like the S & P 500 composite index, called the Spydr (sounds like "spider"). You can find one in almost all the major indexes like the Dow Jones Industrial Average and most of the Russell indexes.

You can get a combination of both. For example, you invest in an ETF that follows the Russell 2000 which tracks small cap stocks.

Unlike traditional investment funds, the ETF is traded on open exchanges, so that the word "trade". He has two great advantages and very important consequences.

First, it is cheap. All you pay is the negotiating committee. This means that to avoid management fees that are generally high, with many mutual funds. You pay $ 20 or $ 10 or so charges agent for the purchase and sale of the ETF. In fact, many brokers do not charge a fee for the Foundation to attract investors to their brokers.