exchange-traded fund

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exchange-traded fund

(ETF), in finance, an investment company that in exchange for the deposit of a portfolio of stocks, bonds, commodities, or other assets issues securities that represent those assets and may be traded like shares of stock. Shares in an ETF may only be issued to the fund's authorized participants, typically large financial institutions, and usually in a large block of 10,000 to 50,000 shares, known as creation units. Shares in an ETF must also be redeemed in creation units. ETF shares may be purchased and traded by most individual investors using a brokerage account.

Most ETFs are similar to index funds (see mutual fundmutual fund,
in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e.
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) in that they represent a portfolio that is designed to track an index of a financial market, such as the S&P500. ETFs, however, track a greater range of indexes and thus offer more options and more specifically targeted choices for an investor. Unlike shares in a mutual fund, which may be redeemed only at the end of the business day when the net asset value is determined, ETF shares may be bought or sold at any time on an exchange and also may be sold short and purchased on margin, which is useful for traders. In general, compared to mutual funds, ETFs are more useful to the active trader with larger financial resources than to the long-term small investor. The first ETF was created in 1993 in the United States; the number of ETFs and amount of money invested in them grew significantly in the early 21st cent.

References in periodicals archive ?
A potential upgrade of Qatar and the UAE from frontier to emerging market status by index compiler MSCI could attract foreign investor interest in the ETFs. But for a country like Saudi Arabia, the Arab region's biggest stock market and the most restrictive toward foreign investors, the task is even more difficult since it is not included on global indices.
The top asset adder among Vanguard's bond ETFs this year is the Vanguard Total International Bond ETF (NASDAQ: BNDX), which has garnered inflows of $5.38 billion, putting it among the top 10 U.S.-listed ETFs overall.
Small plans that do not have access to the low-cost institutional share classes of mutual funds could also benefit from including ETFs in their lineup, says Mitch Reiner, chief operating officer (COO) of Capital Investment Advisors.
Furthermore, ETFs are attractive to investors because they exhibit low costs, transparency and tax efficiency.
Most ETFs are considered to be registered investment companies for tax purposes.
The early index funds, whether in the form of mutual funds or ETFs, tracked widely followed market benchmarks.
-Invesco BulletShares 2021 USD Emerging Markets Debt ETF (Ticker: BSAE)
"Given that minimizing tax impact is a central selling point for many ETFs, sponsors will have to shape their product offerings according to the tax structures of specific markets," PwC states.
A common misconception of active ETFs is that they are all supposed to beat the market or passive ETFs.
This family of ETFs includes the Horizons S/P 500 Covered Call ETF, which is listed on the New York Stock Exchange under the ticker symbol HSPX.
Inverse ETFs move in the opposite direction of their benchmark.