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[Guru Dudette]

Exchange Traded Funds (ETFs)

Exchange Traded Funds, like SPYders, Vipers, Cubes, DIAmonds, HOLDRs, QQQ and iShares are all examples of ETFs. The broad class of funds, excluding closed-end funds, which trade throughout the day over an exchange. ETFs have low annual expenses, but you must pay comissions to trade them. ETFs do not redeem shares for cash, and thus do not need to sell securities (possibly realizing capital gains) to pay investors who redeem their shares. They are typically more tax-efficient than mutual funds. Most ETFs are index funds.

ETFs represent shares in either fund or unit trusts that hold portfolios of stocks, and are designed to track the performance of their underlying portfolios of stocks. ETFs give investors the opportunity to buy or sell an entire portfolio of stocks in a single security, as easily as buying or selling a stock.