A.I.M. Users Bulletin Board

[AIMster]

ETF? Is that a kind of mutual fund?

Yes. It stands for Exchange Traded Fund. Originally the province of index funds, ETF's have expanded in all sorts of directions. Like any mutual fund, these will hold a range of individual securities according to some formula. For instance the S&P 500 fund is market-cap weighted, meaning that the larger companies are held in a larger portion than smaller cap companies.

They can be traded like regular stocks, unlike traditional mutual funds that are priced once, at the end of the day. Traditionally they're not recommended for people saving periodically as there will be in most cases a commission charge for each buy or sell. There are ways around that, though. The other part is that most of them, not all, are passively managed, meaning that they only seek to replicate the performance of a given corresponding index, rather than use any computational and/or human intervention to "beat" the market. Thus their fees are often fractional compared to other alternatives.

They've expanded, as I mentioned, with Powershares being on the vanguard of some of the more "creative" ETF's. iShares http://www.ishares.com is one of the big players and you can learn a lot on their site.

Best,

AIMster