Exchange Traded Funds

Perhaps one of the most significant developments for individual investors over the past several years has been the rapid growth of exchange traded funds (ETF'). On this page you will discover links to most of the firms offering ETF's as well as independent research on the subject.

Definition

Exchange Traded Funds are funds that track an index or mimic a particular investment style. Unlike a tradional open-ended mutual fund, ETF's can be traded like a stock. Investors are thus able to employ many of the same invesment strategies with an ETF that are used with common stock, such as short selling and options strategies. ETF prices fluctuate throughout the day, just like any other stock's price and in the very short run, may deviate in performance from their underlying index or style. Investors in ETF's will need a broker in order to trade them and as a result pay a commission. ETFs can be more tax efficient than traditional mutual funds and often (but not always!) carry lower fees that open-ended funds employing a similar style.

Buyer Beware!

With the proliferation of EFT's (there are now more than 265!) and the diverse choices they offer, it is even more important for investors to investigate before investing. So, please use the links to study the ETF's you are considering and pay special attention to the stocks, particularly the percentage, held in the portfolio. You may find that a particular fund may increase your exposure to a particular stock or groups of stocks above where you are comfortable. Also be sure to check how the ETF performs versus the market basket (i.e. the NASDAQ, S&P 500, etc.) to which you are trying to gain exposure. And always make sure you fully understand all the costs associated with a particular ETF. While fees are generally lower than mutual funds, you will be paying a commission to the broker you are using.

Cool Sites!

Here is a "cool" site from the NASDAQ - an ETF heat map showing the performance of the top 100 ETF's. When you click on the link, two windows will open. Leave both open to use the heat map.

NASDAQ ETF HeatMap

Helpful Books

Here are some titles that may help when investing in ETF's: