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Exchange traded fund |
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Exchange traded fundETFs are a new kind of collective investment fund competing with investment trusts and unit trusts for investors' money.In some ways they are a conventional tracker fund, pooling the cash of a large number of investors and investing it in a basket of shares in companies that make up an index (e.g. members of the FTSE A All-Share).Like unit trusts, ETFs are open ended, which means that new units can be issued in response to demand. The advantage of this is that they trade at a price which is close to the net asset value of the fund (i.e. the value of its investments) - something that cannot be said of investment trusts which are closed funds.But unlike unit trusts, ETFs do not usually have initial charges and their annual management charges are much lower (averaging 0.35%). You will have to pay broking commission, but some ETFs are exempt from Stamp Duty.Another feature of ETFs is that their prices are updated continuously during the trading day to reflect the indexes they track. This is an improvement over unit trusts where prices are only recalculated every 24 hours. So if you buy shares in an ETF at 2 o'clock on Monday the price you pay will be directly related to the NAV at that time.ETFs pay a dividend to their shareholders, which is the sum of all the dividends received from the ETF's investments minus an annual management fee. Typical annual fees are under 0.5% of the fund's value.The UK's first ETF was launched by Barclays Global Investors in 2000 and took 80,000 trades in its first week. It can be held in both PEPs and ISAs and does not attract Stamp Duty.You can buy ETFs through most stockbrokers.Similar MatchesOrganised securities exchangeOrganised securities exchangeA stock exchange where trading of listed securities takes place, such as the New York Stock Exchange. Contrast with 'over the counter trading'. Pegged exchange ratePegged exchange rateA regime in which the government or central bank announces an official (par value) of its currency and then maintains the actual market rate within a narrow band above and below that by means of exchange market intervention. Montreal Exchange or Bourse de MontrealMontreal Exchange or Bourse de MontrealThe oldest stock exchange in Canada trading stocks, bonds, futures, and options. The Canadian Market Portfolio Index (XXM) tracks the market performance of the 25 highest capitalized stocks traded on at least two Canadian exchanges. Tokyo Stock Exchange (TSE)Tokyo Stock Exchange (TSE)The largest stock exchange in Japan with the some of the most active trading in the world. Forward foreign exchange contractForward foreign exchange contractAgreement that obligates an investor to deliver a specified quantity of one currency in return for a specified amount of another currency. Further SuggestionsMexican Stock ExchangePhiladelphia Stock Exchange (PHLX) Forward foreign exchange rate Boston Exchange Automated Communication Order Routing Network (BEACON) Exchangeable instrument Moscow Interbank Currency Exchange (MICEX) Stock Exchange Electronic Trading Service Bombay Stock Exchange (BSE) Exchange offer Singapore International Monetary Exchange (SIMEX) American Stock Exchange Foreign exchange dealer Exchangeable Colombo Stock Exchange Exchange rate overshooting Nominal exchange rate Foreign exchange swap Exchange of assets Hong Kong Futures Exchange (HKFE) Oslo Stock Exchange Exchange equalization fund New York Mercantile Exchange South African Futures Exchange (SAFEX) TSE 300 (Toronto Stock Exchange 100 index) Exchange control |
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