An Introduction to Exchange Traded Funds (ETFs)

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Schaeffer's Investment Research provides and introduction to ETFs, or exchanged traded funds.  The video covers the basic purpose of an ETF, types of ETFs, uses of ETFs, and also covers some of the more commonly traded ETFs in the market. 
Schaeffer's Investment Research provides and introduction to ETFs, or exchanged traded funds.  The video covers the basic purpose of an ETF, types of ETFs, uses of ETFs, and also covers some of the more commonly traded ETFs in the market. 

At the core, an ETF is merely a basket of stocks which is put together to act as a liquid mutual fund.  They trade like stocks on the major stock exchanges and can be bought and sold whenever the investor chooses.  Mutual funds, on the other hand, only price at the close of the trading session. 

There are a few different types of ETF's; iShares, Powershares, streetTRACKS, Select Sector SPDRs, and HOLDRs.  For the most part, they all function in the same way; however, different financial firms offer different products.  Out of this list, HOLDRS are a bit different in that they only trade in 100 share lots, which basically means that more capital will be required to trade these stocks.  Secondly, they tend not to be rebalanced very often as compared to the other familes listed.  This can lead to an imbalance of weighting as one or two stocks could dominate the weightings in that ETF.

ETF's can be made to track a wide variety of different products; for example, they can follow broad market indices, sectors, commodities, and even foreign markets.  This speaker uses ETFs to gauge momentum and understand where money is flowing out of and also where it is flowing into. 

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