Exchange Traded Funds (ETFs)

ETFs are passively managed Mutual Funds, which are Exchange Traded. An individual ETF could distinguish itself by tracking a major Equity Index (S&P 500), a Sector, a Market Cap range or an Investment Style.

An ETF is a pooled investment vehicle or Mutual Fund, which is actively traded on a Stock Exchange. Where ETFs and Mutual Funds differ is that an ETF is passively managed, designed to track an index, with lower Management Fees, higher trading activity and liquidity for some EFTs is immediate. An ETF’s tracking error to the reference benchmark will be minimal and would be because of the Management Fee and Trading Fees. ETFs are varied in their asset mix and could be based on a major equity index. The QQQ is based on the NASDAQ Composite, an Equity market Sector Index or a specific Investment Strategy. The more specialised the EFT, the more likely that it will have less positions and higher volatility compared to a Major Index ETF.