Exchange Traded Funds

Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an exchange. An exchange traded fund is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index. The investment objective of an ETF is to achieve the same return as a particular market index.

Exchange traded funds rely on an arbitrage mechanism to keep the prices at which they trade roughly in line with the net asset values of their underlying portfolios.