Business, Legal & Accounting Glossary
ETF stands for Exchange Traded Fund. An ETF is registered with the SEC as an investment company, and it shares trade on a stock exchange intraday like any other public company. The ETF is like a mutual fund, however, in that its assets consist of a basket of stocks deposited by institutional investors. The American Stock Exchange launched the first ETF in 1993. That ETF was called an SPDR, and it tracked the S&P 500. Today, the most common security portfolio for a domestically traded ETF remains a broad-based equity index, although an ETF may instead track a specific sector. The global or international ETF also exists; this variant usually tracks a particular foreign national or regional index. ETF shares can be sold short or bought on margin. The ETF also has a slight tax advantage over a mutual fund. Nevertheless, commissions paid to buy and sell ETF shares tend to make the mutual fund a more attractive investment than the ETF for many investors.
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This glossary post was last updated: 9th February, 2020