ABSTRACT
Exchange Traded Funds (ETFs) are another type of investment vehicle that allows people to buy shares that represent a pool of underlying securities. This makes ETFs similar to mutual funds, but there are also things that make them distinctly different. This chapter examines how they are the same and how they are different. ETFs began primarily as stock index oriented investments, which means that the securities they were comprised of represented a particular market index. The securities that make up the ETF basket are selected by professional managers, just as with the securities that make up a mutual fund. ETFs can be purchased through your broker. Mutual fund families may also sell ETFs through their brokerage division. ETFs would occupy a similar place in your portfolio as mutual funds. As with mutual funds, they can provide a quick and easy method for diversification in either the stock or bond element of your portfolio.
