ETFs: What They Are.
As an introduction this is Wikipedia's general discussion on ETFs.
An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.[1][2]
Only so-called authorized participants (typically, large institutional investors) actually buy or sell shares of an ETF directly from/to the fund manager, and then only in creation units, large blocks of tens of thousands of ETF shares, which are usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares long-term, but usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets.[3] Other investors, such as individuals using a retail brokerage, trade ETF shares on this secondary market.
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs.[3]
1.http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080610006204&newsLang=en, Business Wire (June 10, 2008).
2. The Impact of Exchange Traded Products on the Financial Advisory Industry: A Joint Study of State Street Global Advisors and Knowledge@Wharton (2008).
3. Exchange-Traded Funds, SEC Release Nos. 33-8901, IC-28193, 73 Fed. Reg. 14618 (Mar. 11, 2008).
Source of this article: Wikipedia: http://en.wikipedia.org/wiki/Exchange-traded_fund.
{Note: Wikipedia is a free, web-based, collaborative encyclopedia project. It is currently the largest and most popular general reference work on the Internet. Critics of Wikipedia sometimes accuse it of systemic bias and inconsistencies and allege that it favors consensus over credentials in its editorial process. Critics also sometimes take issue with Wikipedia's reliablility and accuracy. We source it here because we believe generally speaking it is a neutral observer in this article and we in general believe in the accuracy on the subject material it is covering in relation to ETFs.
An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.[1][2]
Only so-called authorized participants (typically, large institutional investors) actually buy or sell shares of an ETF directly from/to the fund manager, and then only in creation units, large blocks of tens of thousands of ETF shares, which are usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares long-term, but usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets.[3] Other investors, such as individuals using a retail brokerage, trade ETF shares on this secondary market.
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs.[3]
1.http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080610006204&newsLang=en, Business Wire (June 10, 2008).
2. The Impact of Exchange Traded Products on the Financial Advisory Industry: A Joint Study of State Street Global Advisors and Knowledge@Wharton (2008).
3. Exchange-Traded Funds, SEC Release Nos. 33-8901, IC-28193, 73 Fed. Reg. 14618 (Mar. 11, 2008).
Source of this article: Wikipedia: http://en.wikipedia.org/wiki/Exchange-traded_fund.
{Note: Wikipedia is a free, web-based, collaborative encyclopedia project. It is currently the largest and most popular general reference work on the Internet. Critics of Wikipedia sometimes accuse it of systemic bias and inconsistencies and allege that it favors consensus over credentials in its editorial process. Critics also sometimes take issue with Wikipedia's reliablility and accuracy. We source it here because we believe generally speaking it is a neutral observer in this article and we in general believe in the accuracy on the subject material it is covering in relation to ETFs.
posted by CR English at 6:32 AM
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