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Wednesday, March 16, 2011

Exchange-traded funds (ETFs) are just one of the many types of investment funds available, but they have some qualities that are unique and set them apart from other vehicles. ETFs are securities that attempt to track all types of indexes, industries, or commodities. For example, an ETF might be made up of securities representative of the technological industry or of the S&P 500.*

When ETFs were first created in the 1990s, the aim was to mimic the movements of an index of a specific financial benchmark. Today, ETFs also follow industries and commodities, not just indexes. The investment vehicle with the sole purpose of mirroring a specific index is called an index fund.

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