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What are exchange-traded funds (ETFs)?
ETFs are funds that trade throughout the day over an exchange. Most ETFs track an index, such as the Standard & Poor’s 500 Index or the Philadelphia Semiconductor Index. Because they are passively managed, ETFs have low annual expenses. They are not closed-end funds, and the fund companies do not redeem shares for cash. ETFs are generally valued at close to their net asset value (NAV), although they sometimes trade at a slight discount or premium. They have grown in popularity in recent years because they give an investor the opportunity to invest in an index or sector without exposing him to the risk of a single stock. In mid-2008, ETFs had assets totaling more than $500 billion.Return to Questions
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