Exchange-Traded Fund (ETF)
An Exchange-Traded Fund (ETF) is a type of investment fund that is traded on a stock exchange. ETFs are similar to mutual funds in that they both hold a basket of stocks, bonds, or other assets. However, ETFs are traded like stocks, meaning they can be bought and sold throughout the day on the stock exchange. ETFs are also more tax-efficient than mutual funds, as they are not subject to capital gains taxes until the fund is sold.
History of ETFs
ETFs were first introduced in 1993 by the American Stock Exchange. Since then, ETFs have become increasingly popular, with more than $4 trillion in assets under management worldwide. ETFs have become popular due to their low costs, tax efficiency, and ability to be traded like stocks. ETFs are also popular because they provide investors with access to a wide range of asset classes, such as stocks, bonds, commodities, and currencies.
Comparison of ETFs and Mutual Funds
| ETFs | Mutual Funds |
|---|---|
| Traded on stock exchange | Not traded on stock exchange |
| Tax efficient | Not tax efficient |
| Low cost | High cost |
| Wide range of asset classes | Limited range of asset classes |
Summary
Exchange-Traded Funds (ETFs) are a type of investment fund that is traded on a stock exchange. ETFs are similar to mutual funds in that they both hold a basket of stocks, bonds, or other assets. However, ETFs are more tax-efficient than mutual funds, as they are not subject to capital gains taxes until the fund is sold. ETFs are also popular due to their low costs, tax efficiency, and ability to be traded like stocks. For more information about ETFs, visit websites such as Investopedia, The Balance, and Morningstar.
See Also
- Mutual Funds
- Index Funds
- Hedge Funds
- Real Estate Investment Trusts (REITs)
- Closed-End Funds
- Exchange-Traded Notes (ETNs)
- Stocks
- Bonds
- Commodities
- Currencies
