Exchange Traded Fund
ETFs or Exchange Traded Funds are a way to invest in or trade an asset that is not easily accessible through traditional channels. ETFs can be made up of groups of individual stocks, as in an index. They may track a foreign stock market index, such as the Nikkei 225 index. In doing so, they allow the buyer or trader to control a large sampling of investments or securities via a single purchase.
Alternatively, they may track a single instrument–such as the price of gold–but in a simpler, cheaper, or more effective way than other options (gold futures, gold mining stocks, South African Rand).
ETFs act as stocks, and can be purchased in the same way. A trader purchases a certain number of shares, pays his broker a commission, and hopes that his analysis favors the outcome.
January 15th, 2007 at 5:34 am
[…] If you read my article on trading oil futures, you know that trading oil can be very expensive if you’re on the wrong side of the trade in terms of the carry charge. Another option worth exploring is ETFs, short for exchange traded funds. For a general explanation of the term exchange traded fund, click here. […]
January 26th, 2007 at 2:07 am
[…] In recent articles I’ve discussed the two primary options for trading the price of oil directly. One was oil futures, and the other the oil ETF (exchange traded fund, symbol USO). I recently became aware of another option, which is as close as a private investor can get to trading spot oil, to my knowledge. […]