Exchange Traded Funds (ETFs), which are funds that trade indexes or specific sectors, are one of the more popular trading vehicles.
Some of the most common forms of these indexes are the S&P500, the Dow Jones Industrial Average, and the NASDAQ Composite. Some of the most common sectors include bonds, metals, commodities, technology, and healthcare.
ETFs are similar to mutual funds as they are made up of a portfolio of stocks. However, unlike mutual funds, they are actively traded during normal market hours in the same manner as stocks.
ETFs are priced and traded continuously throughout the trading day; therefore, they hold a significant advantage in the flexibility that they offer over mutual funds. When trading ETFs you can buy them, sell them short, hold them as long-term investments or trade them regularly as you would trade individual stocks.
With ETFs can take advantage of the diversification that goes with investing in entire markets, sectors, regions, or asset types. Because they represent groupings of stocks, the more actively traded ETFs (especially those based on major indexes), will typically trade at much higher volumes than individual stocks. Higher trading volume means higher liquidity, which enables you to get into and out of investment positions relatively easily and with minimal expense. ETFs incur much lower management fees than do mutual funds.
ETF Trading Articles
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