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 ?
Beltone Financial was perhaps the first institution to call for the release of exchange traded funds within Egypt towards the end of 2008, before the outbreak of the world financial crisis.
Lipper defines an "indexed fund" as an open-end mutual fund (not an Exchange Traded Fund, or ETF) that falls into one of the following subcategories: pure index, enhanced index or index-based.
As the first exchange traded fund to provide investors with convenient, cost effective access to the gold bullion market, we are pleased that GLD Shares will be the first and only ETF to offer this enhanced ability to access the broad, global liquidity of the gold bullion marketplace," said James Burton, managing director of World Gold Trust Services, LLC.
The American Stock Exchange is happy to work with ETF Advisors for their premiere launch of FITR exchange traded funds," said Salvatore F.
The fund adheres to an absolute return strategy under which it strives to earn a positive investment return each year, regardless of stock market conditions, by investing in a combination of exchange traded funds and individual domestic value-oriented equity securities.
XTF LP and its subsidiaries, XTF Capital, XTF Advisors and XTF Market Makers, together comprise a financial services company dedicated to bringing the myriad benefits and efficiencies of exchange traded funds (ETFs) to investors.