Exchange-Traded Funds (ETFs): What Are They?

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Exchange-Traded Funds (ETFs)

A investment product called an exchange-traded fund (ETF) functions very similarly to a mutual fund. ETFs often follow a certain sector, index, commodity, or other asset, but unlike mutual funds, they may be bought or sold on a stock market just like normal stocks can. Anything from the price of a single commodity to a sizable and varied group of assets can be tracked by an ETF. ETFs may even be designed to follow certain investing strategies.

Exchange-Traded Funds (ETFs): An Overview

Because it is traded on an exchange like stocks are, its known as an exchange-traded fund. As shares of an ETF are purchased and sold on the market during the trading day, the price of the shares will fluctuate. Contrary to mutual funds, which only trade once daily after the markets close and are not traded on an exchange, this is not the case. In comparison to mutual funds, ETFs are typically cheaper and more liquid.

Type of ETF

Equity exchange-traded funds (ETFs):

These ETFs monitor the performance of a selected stock market index, such as the Dow Jones Industrial Average, Nasdaq, or S&P 500.

Bond ETFs:

These ETFs aim to deliver income and capital growth by investing in fixed-income assets like corporate or government bonds.

Commodity ETFs:

These ETFs invest in commodities, including agricultural goods, gold, silver, and oil. They could own tangible goods or make investments in futures contracts.

Currency ETFs:

By investing in foreign currencies, these ETFs give investors exposure to exchange rates.

Sector ETFs:

ETFs that invest in specific industrial sectors, such as technology, healthcare, or energy, are known as “sector ETFs.”

International ETFs:

These ETFs invest in businesses or assets from other markets, giving investors access to movements in the world economy.

Alternative ETFs

invest in non-traditional securities.

Disclaimer : This blog is created basically to educate investors and create awareness. It is the responsibility of the reader to consult a financial advisor before investment decision.

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