The Importance of ETFs Wednesday, November 19, 2:19 PM ET
"ETF" stands for Exchange Traded Fund. ETFs trade on an exchange just like stocks, but instead of "shares" investors are actually buying and selling "units." These units can be traded back and forth just like stocks, but a big difference is that units can also be created or destroyed to accommodate investor demand. Another type of fund called a "CEF" -- which stands for Closed End Fund -- has a steady number of shares that does not change on a day to day basis.
This difference between ETFs and CEFs means that generally speaking, ETFs tend to trade extremely close to the underlying net asset value of the fund, whereas the price of a share of a CEF can move dramatically above or below the underlying net asset value of the fund, all depending on the supply of shares and the level of investor demand.
But unlike CEFs that typically have a well-paid manager making decisions about how to invest the fund's assets, ETFs by comparison typically take out all of the decision-making and instead blindly follow an underlying index or formula. That underlying index can be anything from the S&P 500, to an index of investment grade bonds, to gold, to emerging markets, and everything in between. By taking out the decision-making and simply following an index, ETFs are able to charge a very low fee as a percentage of net assets, helping drive their popularity among investors.
Any ideas and opinions presented in all Market News Video clips are for informational and educational purposes
only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners.
In no way should any content contained herein be interpreted to represent trading or investment advice.
None of the information contained herein constitutes a recommendation that any particular security, portfolio,
transaction, or investment strategy is suitable for any specific person. All viewers agree that under no
circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held
liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.
X
Wait! Don't leave yet.
Want to receive our latest research absolutely free?
⤹
Click the button below for your complimentary copy of Your Early Retirement Portfolio: Dividends Up to 8.3%—Every Month—Forever.
You'll discover the details on 4 stocks and funds that pay you massive dividends as high as 8.3%.
