An ETF is an investment that combines aspects of mutual funds and stocks. They represent a basket of securities that track an index such as the Standard & Poor's 500 Index. ETFs, which are available to individual investors through brokers and advisers, trade like stocks on an exchange.This means they can be bought throughout the day (Not just at end of day like Mutual Funds), and ETFs can also be sold short, and used in margin accounts.
ETFs have beeen on the scene for over 15 years now, and have experienced tremendous growth over the last few years. Mutual Fund companies, such as Vanguard, and Rydex have even introduced ETFs that mimic some of their existing funds. ETFs can be used in 529 Plans, 401k Plans, and other retirement plans.
In later posts we will cover all the different types of ETFs, as well as particular advantages and disadvantages to using ETFs for the individual investor.
Tuesday, February 24, 2009
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