ETF

Nov 17th, 2008 | Filed under: Investing Moment, Video

Exchange-traded funds. Index funds. What’s the difference?

An exchange-traded fund, ETF for short, is an investment vehicle. Like a mutual fund, it holds assets, such as stocks or bonds. But, unlike a mutual fund, it trades on an exchange, like a stock.

Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500 Index. As a result, many people think of ETFs as modified index funds.

ETFs, which are relatively new investments, are attractive because of their low costs and tax efficiency. Because they aren’t actively managed, ETFs typically don’t have high fees. They also tend to have low turnover, to they generate relatively low capital gains.

Join Cake Financial Today for FREE!