What Are ETFs (Exchange-Traded Funds)?

An accomplished financial planner and investment advisor, Luke Noble has led Noble Financial Group since 2006. One of Luke Noble’s areas of expertise is ETF investments.

A relatively popular form of investment for individuals and families, ETF is an acronym for “exchange-traded funds.” Attached to the performance of a particular index of stocks, bonds, commodities, or other securities, ETFs are pooled investment products much like mutual funds. However, they differ from mutual funds in their relationship to the stock exchange. Traders can freely buy and sell ETFs on an exchange just as they would an individual stock. Mutual funds, by contrast, are only eligible for a single trade per day after the closing bell.

Among their other benefits, ETFs generally come with lower broker commissions and other trading expenses. Furthermore, they have no minimum investment limits and tend to be more tax efficient.

Financial representatives offer a variety of ETFs to meet the specific wants and needs of their clients. These ETFs range from fixed income ETFs that include a diverse array of bonds to inverse ETFs that rise in value when their underlying index declines.