What are Exchange Traded Funds ?
Exchange Traded Funds (ETFs) are a type of exchange-traded investment product that must register with the SEC under the 1940 Act as either an open-end investment company (generally known as “funds”) or a unit investment trust.Like mutual funds, ETFs offer investors a way to gather their money in a fund that makes investments in stocks, bonds, or other assets and, in return, to receive an interest in that investment. Unlike mutual funds, however, ETF shares are traded on a national stock exchange and at market prices that may or may not be the same as the net asset value (“NAV”) of the shares. ETFs can be categorized in the following categories : Index based ETFs seek to track a securities index like the S&P 500 stock index and generally invest in the component securities of the index. Actively Managed ETFs seek to achieve a stated investment objective by investing in a portfolio of stocks, bonds, and other assets. Unlike with an index-based ETF, an adviser of an actively managed ETF may actively buy or sell components in the portfolio on a daily basis without regard to conformity with an index. The manager of the fund may charge the fees as well for actively managing the funds.