Stock Market for Beginners: Exchange-Traded Funds Overview
What is an ETF
ETFs (exchange-traded funds) are listed investment funds that track the performance of a particular index or a basket of securities. You can trade ETFs on stock exchanges during market hours, just like stocks.
ETFs (exchange-traded funds) are listed investment funds that track the performance of a particular index or a basket of securities. You can trade ETFs on stock exchanges during market hours, just like stocks.
Major Types
1. Market ETFs: Designed to track a particular index like the S&P/ASX 200
2. Bond ETFs: Designed to provide exposure to virtually every type of bond available: US Treasury, corporate, municipal, international, high-yield, and several more bonds
3. Sector and Industry ETFs: Designed to provide exposure to a particular industry, such as oil, pharmaceuticals, or high tech
4. Commodity ETFs: Designed to track the price of a commodity, such as gold, oil, or corn
5. Style ETFs: Designed to track an investment style or market capitalization oriented, such as large-cap value or small-cap growth
6. Inverse ETFs: Designed to profit from a decline in the underlying market or index
1. Market ETFs: Designed to track a particular index like the S&P/ASX 200
2. Bond ETFs: Designed to provide exposure to virtually every type of bond available: US Treasury, corporate, municipal, international, high-yield, and several more bonds
3. Sector and Industry ETFs: Designed to provide exposure to a particular industry, such as oil, pharmaceuticals, or high tech
4. Commodity ETFs: Designed to track the price of a commodity, such as gold, oil, or corn
5. Style ETFs: Designed to track an investment style or market capitalization oriented, such as large-cap value or small-cap growth
6. Inverse ETFs: Designed to profit from a decline in the underlying market or index
How ETF Works
An ETF can be purchased and traded just like corporate stocks. ETFs also have ticker symbols. Their intraday price data is easily accessible throughout the trading day.
An ETF can be purchased and traded just like corporate stocks. ETFs also have ticker symbols. Their intraday price data is easily accessible throughout the trading day.
However, unlike corporate stocks, the number of shares outstanding in an ETF can fluctuate daily due to the ongoing issuance of new shares and redemption of existing shares. The capacity of an ETF to issue and redeem shares continuously maintains the market price of its underlying securities in line.
Advantages
• Easy to trade: You can buy and sell ETFs at any time during the trading hours
• Transparency: Many ETFs are index-based. Index-based ETFs typically make their holdings data publicly available.
• Diversification: ETFs carry a basket of stocks or other securities, allowing for greater diversification.
• Easy to trade: You can buy and sell ETFs at any time during the trading hours
• Transparency: Many ETFs are index-based. Index-based ETFs typically make their holdings data publicly available.
• Diversification: ETFs carry a basket of stocks or other securities, allowing for greater diversification.
Disadvantages
• Higher Costs: The cost will be higher if you compare an ETF to investing in a specific stock. The actual commissions paid to the broker may be the same, but there are management fees for the ETFs.
• Illiquidity: Wide bid/ask spreads exist in lightly traded ETFs, which means you'll buy at the high end and sell at the low end.
• Settlement dates: ETF sales are not settled for two days after the transaction, which implies that you won't be able to reinvest your proceeds for two days as the seller.
• Higher Costs: The cost will be higher if you compare an ETF to investing in a specific stock. The actual commissions paid to the broker may be the same, but there are management fees for the ETFs.
• Illiquidity: Wide bid/ask spreads exist in lightly traded ETFs, which means you'll buy at the high end and sell at the low end.
• Settlement dates: ETF sales are not settled for two days after the transaction, which implies that you won't be able to reinvest your proceeds for two days as the seller.
The above is a brief introduction to ETFs. If you have any questions, comment to let us know. In the next episode, we will discuss the differences between ETFs and Mutual Funds. Please follow us and stay tuned!![]()
Disclaimer
Moomoo is an online trading platform offered by Moomoo Inc.. In Australia, financial products and services on moomoo are offered by Futu Securities (Australia) Ltd (ACN 095 920 648) , an Australian Financial Services Licensee (Licence No: 224663) regulated by the Australian Securities and Investments Commission (ASIC).
Moomoo is an online trading platform offered by Moomoo Inc.. In Australia, financial products and services on moomoo are offered by Futu Securities (Australia) Ltd (ACN 095 920 648) , an Australian Financial Services Licensee (Licence No: 224663) regulated by the Australian Securities and Investments Commission (ASIC).
The content is provided for educational and informational use only. Any information and data used in the content are general in nature, for purpose of illustration only, have been prepared without any consideration of your investment objectives, financial situations or needs, and shall not be used to predict future results or trends. You should consider the appropriateness of the information having regard to your personal circumstances before making any investment decisions. No content herein shall be considered as a recommendation or solicitation for the purchase or sale of securities, futures, or other financial products or services (for whatever reason).
All information and data, if any, are for reference only and past performance should not be viewed as an indicator of future results. It is not a guarantee for future results. Investments in stocks, options, ETFs, and other instruments are subject to risks, the value of investments may fluctuate and as a result, clients may lose the value of their investments. When trading in a margin account, clients may suffer losses greater than their original investments. Please consult your financial adviser as to the suitability of any investments.
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Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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