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Thread: ETF's . What are they?

  1. #21

    Join Date
    Feb 2009

    Default Re: ETF's . What are they?

    Found another article that helps explain ETFs in global terms. Not much detailed information, but lists topics for further study.

    5 Things Every Investor Should Know About ETFs

    By Tom Lydon on February 7, 2009

    After diving into the world of exchange traded funds (ETFs), are you now wondering what to look for? Come and take a gander.
    ETFs offer exposure to most sectors and asset classes with the added bonus of being liquid, transparent and tax efficient, writes Dan Burrows for SmartMoney.

    While ETFs are indeed funds, an investor should still treat them like stocks. But unlike stocks, ETFs have a few identifiable quirks to look out for:
    • Research. You need to know what you’re getting yourself into. The transparency in ETFs are because of the underlying index they track, so it is prudent to look over the components and allocations of that benchmark.
    • Tracking error. ETFs try to replicate the returns of the underlying index and it sometimes does diverage from the actual value. in 2008, listed ETFs in the United States had an average tracking error of about 0.5%. Wider tracking errors tend to occur more often in global ETFs because of global time differences.
    • Buy with limit. Never use market orders when buying ETFs. When specialists execute your trade, you will most likely not get the best price. Limit orders specify the price at which you may want to sell or buy.
    • Volume. Liquidity and volume size help maintain the efficient and correct prices for ETFs. We try to focus on ETFs with at least $50 million in assets. A $20 million ETF made up of many well-traded stocks can also be as good.
    • Taxes. An appealing attribute in an ETF is its tax efficiency, but it should be noted that a few ETFs do have capital gains distributions.


  3. #22

    Join Date
    Feb 2009

    Default Re: ETF's . What are they?

    More good information on ETFs from The Motley Fool. The quoted information is just the intro. There is a lot of good general ETF information, as well as great links for more data, in this article.

    ETFs: The "It" Equity?
    Bold, beautiful, cheap, and sassy, exchange-traded funds make traditional mutual funds look as exciting as granny in her flowered print dress. Here's why ETFs are the latest "it" equity.

    By Seth Jayson
    Wouldn't it be something to travel back in time and take a look at the seminal moments in investing history? Cave-men exchanging shiny rocks and pointed sticks for dinosaur steaks... traders swapping stocks under a Wall Street Buttonwood tree... John Bogle outlining his Master's thesis on index investing and later turning the moldy old mutual-fund world on its head.

    We're a bit late to witness the birth of this century's latest "it" equity -- the Exchange Traded Fund (ETF) -- but we're in a good position to observe its meteoric rise. An ETF is similar to a mutual fund in that each share gives the holder a tiny piece of dozens, hundreds, or even thousands of companies that are held by the fund. Their cute-ish names -- like VIPERs, Spiders, Diamonds, and iShares -- belie the wallop that ETFs are giving investors and investment firms.

    Why the breathless excitement? One reason is that they are simple vehicles for trading. Unlike mutual funds, ETFs trade all day long on the exchanges, just like stocks. ...." [more]



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