Financial Glossary

ETF or Exchange-Traded Fund

ETF or Exchange-Traded Fund is trading in the exchange indexes like stock trading. Like buying or selling a stock in the secondary market, ETF trades the index of stock exchanges. Similar to fluctuating stock prices, the index also ranges to profit or loss in such trades. An ETF being an index fund holds stocks, bonds, commodities, and generally operates with an arbitrage mechanism, unlike stock trading. It keeps the trading close to its net asset value, but some deviations occasionally occur even with an ETF.  Trading in ETF offers low expense rations and fewer commissions to brokers than trading in stocks individually instead of as a whole in the ETF.

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