An Exchange Traded Fund or ETF superficially resembles index mutual funds but with some important differences:
- ETF's are traded throughout the day just like regular stock.
- NAV or Net Asset Value is known. The value of an ETF can be calculated throughout the day because the underlying index doesn't change.
- Arbitrage. ETF's are not traded at systematic premiums or discounts since financial institutions can exchange ETF's for the underlying assets.
- Tax Advantages. Very few ETF's distribute capital gains.
Learn more about Investing with ETFs or Exchange Traded Funds