Definition
Exchange-Traded Funds
- A collection of investments, but passively managed
- Instead of a fund manager choosing investments, most EFTs just track the performance of a particular market index w/ the help of computer algorithms
- Can be designed to track specific sections of the market or follow certain investment strategies, or include a broad range of investments
- they are traded on a stock exchange ⇒ they are traded quickly, multiple times a day, and change value in real time
- generally lower annual expenses than actively managed mutual funds
- Example: S&P 500
- Mutual Funds and ETFs are a good way for smaller investors to diversity and own a mix of many different assets. DON’T PUT ALL YOUR EGGS IN ONE BASKET.