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Now you understand an Index, so What is an “Index Fund” or an “ETF”?

Now you understand an Index, so What is an “Index Fund” or an “ETF”?

September 28, 2017
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An Index Fund is a type of Exchange Traded Fund (aka: ETF)

An ETF is a fund that is traded on stock exchanges. An ETF can hold asset such as stocks, commodities, or bonds. They have been available in the US since 1993 and in Europe since 1999. The relative appeal of index funds, ETFs and other index-replicating investment vehicles has grown rapidly since their introduction.

ETFs are similar in many ways to traditional mutual funds, except that shares in an ETF can be bought and sold throughout the day like stocks on a stock exchange. In the United States, mutual funds price their assets by their current value every business day, usually when the NYSE closes for the day. Index ETFs, conversely are priced during trading hours.

ETFs prove to be an ideal investment for many as they are low in cost and efficient for tax purposes. ETFs also come in a variety of risk classes from defensive to aggressive and all proportions in between. This offers a greater option for advisors to use many combinations to meet all their client’s goals & objectives while maintaining strong diversification.

An important note to remember, not just with ETFs but generally speaking, it is always best to think of investing as a long-term event, especially for asset allocation purposes.

(It’s been proven best to avoid pulling your money out of the market during a downturn, but it is best to hold on and ride the wave out until you can reap the rewards of the recovery!)

 

* All investing is subject to risk, including possible loss of principal. Past performance is no guarantee of future results.