Exchange-Traded Fund (ETF)
A pooled fund that trades intraday on an exchange like a stock.
What is Exchange-Traded Fund (ETF)?
A fund whose shares trade on an exchange throughout the day at market prices that track, but can deviate from, NAV. The in-kind creation and redemption mechanism keeps price near NAV and makes ETFs unusually tax-efficient relative to mutual funds.
Exchange-Traded Fund (ETF): a worked example
You can buy an ETF at 10:15 a.m. with a limit order; a mutual fund makes you wait for the close.
More terms in Securities & Instruments
Common Stock
An ownership share in a company, with voting rights and last claim on assets.
Preferred Stock
Equity with a fixed dividend and priority over common, usually without votes.
Bond
A loan to an issuer that pays interest and returns principal at maturity.
Coupon Rate
The bond's stated annual interest as a percentage of par.
Yield to Maturity (YTM)
The total annualized return if you buy today and hold to maturity.
Par Value (Face Value)
The principal repaid at maturity, conventionally $1,000 per bond.
Duration
A bond's price sensitivity to a 1% change in interest rates.
Credit Rating
An agency's assessment of an issuer's likelihood of default.