UK Accounting Glossary
An exchange-traded fund (ETF) is a pool of stocks or commodities trading as a single stock on a stock exchange. Hence the name exchange-traded fund. Unlike mutual funds, an exchange-traded fund may be bought on margin, sold short, traded intraday, or in any other way traded like a stock. As with stocks, investing in an exchange-traded fund will incur trading costs. Often, an exchange-traded fund will mimic a stock index; popular exchange-traded funds are the DIA (mimics the Dow Jones Industrial Index) and the QQQQ (mimics the NASDAQ 100). Other exchange-traded funds can track specific industries, regions, or investing styles. Exchange-traded fund family examples are iShares, VIPERs, and SPDRs. Exchange-traded fund shares can be sold in the secondary market or large shareholders (i.e. institutions) can redeem for stock held by the fund itself, which can help investors in an exchange-traded fund avoid capital-gains taxes.
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This glossary post was last updated: 9th February 2020.