Getting started in Exchange Traded Funds (ETFs)

Welcome to a unique new way to invest.

To answer your first question, an exchange–traded fund is a basket of stocks that duplicate a stock index, such as the S&P 500 or Dow Jones. The basket trades on the exchange as a single stock. This arrangement gives an exchange–traded fund (ETF) special qualities. For one thing, because an ETF represents the stocks of several different companies, it carries lee risk that a share of stock in just one company. ETFs can be bought and sold throughout the trading day. They can be shorted, bought on margin, a traded with stop and limit orders. They are passively managed, so they have much lower turnover and smaller expenses that actively managed funds.