What are EFTs ?
An ETF (Exchange-Traded Fund)is an investment fund that holds a collection of assets like stocks, bonds, commodities, or a mix of these, allowing investors to diversify their portfolios with a single purchase. ETFs are traded on stock exchanges, which means they can be bought and sold throughout the trading day just like individual stocks. This flexibility makes them popular among both individual and institutional investors.
Here are a few key points about ETFs:
Diversity
Most ETFs track specific indexes, such as the S&P 500, technology sectors, or international markets, allowing investors to own a broad range of assets within a single fund.
Lower Fees
Generally, ETFs have lower management fees than mutual funds because they are often passively managed, tracking an index rather than having a manager actively pick investments.
Liquidity and Flexibility
Since ETFs trade like stocks, investors can buy and sell them at any time during the trading day, allowing for greater flexibility and liquidity compared to mutual funds, which only trade at the end of the day.
Tax Efficience
ETFs are typically more tax-efficient than mutual funds because they minimize capital gains distributions, meaning investors can often defer paying taxes until they sell their shares.
Some popular examples of ETFs include SPY (tracks the S&P 500), QQQ (tracks the NASDAQ-100), and VTI (tracks the total U.S. stock market).