Definition of Exchange Traded Fund



Exchange traded funds are just like mutual funds that are a collection of multiple types of securities and that are traded on exchanges on a daily basis like shares and bonds are traded. An ETF can contain multiple securities like shares, bonds, etc. ETF has a price and this makes it not different from a marketable security.

 


A big advantage of investing in the ETF is the low transaction cost in terms of brokerage fees. For example, a standard transaction fee for any broker is $0.5, an ETF containing 10 securities will cost you $0.5 to buy it but if you buy each security separately from the exchange you will have to pay $5 (10 x $0.5).


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