All about ETF

ETF stands for Exchange-Traded-Funds. An ETF is a financial product that functions as an investment fund and tracks the performance of an underlying index, commodities, bonds, or a collection of assets, similar to an index fund. Investors exchange ETFs on stock exchanges, like individual equities. These investment options provide investors with access to a varied range of assets, offer liquidity and flexibility, and generally have less expensive fees in comparison to conventional mutual funds. Investors have the ability to purchase and sell shares of ETFs at market prices during the trading day. This feature has made ETFs a preferred option for many investors who are looking for diversification and convenient trading in the financial markets.

THE IDEA OF ETF

The idea of an ETF was conceived by Nathan Most, a portfolio manager at the American Stock Exchange (AMEX). In the late 1980s, he introduced the concept of establishing a fund that would be traded on the stock exchange, functioning similarly to a stock but representing a comprehensive market index. His objective was to amalgamate the advantages of individual equities and conventional mutual funds.

FIRST ETF

The first Exchange-Traded Fund (ETF) was the Standard & Poor's Depositary Receipt (SPDR), commonly referred to as the "Spider." State Street Global Advisors introduced it on January 22, 1993. The SPDR ETF was created to track the performance of the S&P 500 index, providing investors with exposure to a diverse portfolio of large-cap U.S. stocks. The release of SPDR marked the start of the ETF business, offering investors a new and innovative way to invest in the stock market.

WORLDWIDE FINANCIAL MARKETS

Prominent financial markets, such as the United States, Canada, European countries, Japan, Australia, and several Asian countries, have well-established ETF markets. In these regions, stock exchanges list a varied choice of ETFs covering various asset classes, industries, and investing strategies.

COMMON TYPE OF ETFs

Investors have the option to invest in a wide range of ETFs. Nevertheless, it is crucial for investors to thoroughly evaluate their investing objectives and risk tolerance when choosing ETFs.

Type of ETF - Explanation

Equity-ETF : These ETFs track the performance of a specific equity index or a basket of stocks. For example, ETFs that follow the S&P 500, Nasdaq-100, or global stock indices.

Bond-ETF : These ETFs invest in fixed-income instruments such as government, corporate, and municipal bonds. They provide exposure to the bond market and may concentrate on specific maturity dates or credit ratings.

Sector-ETF :These ETFs focus on certain sectors or industries, allowing investors to direct their investments towards areas such as technology, healthcare, finance, or energy.

Commodity-ETF : Commodity ETFs monitor the price movements of tangible commodities such as gold, silver, oil, and agricultural items. They offer investors the opportunity to gain knowledge about commodity markets without the requirement of owning commodities directly.

Currency-ETF :These ETFs enable investors to acquire exposure to foreign currencies or a collection of currencies. Investors can use it for the purpose of mitigating exposure to currency risk or for engaging in speculative activities related to currency fluctuations.

MORE INFORMATION

To access the latest and country-specific information regarding ETFs, it is advisable to consult financial news sources, stock exchange websites, and financial data marketers that monitor global ETF markets. Furthermore, it is advisable to consult regulatory authorities in different countries, as they could provide details regarding authorised ETFs.