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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 MatchesExchange for physicalsExchange for physicalsA transaction in which one party buys the physical commodity and simultaneously sells futures and the other party does the opposite - sells the physical commodity and simultaneously obtains a long futures position. Exchange Rate MechanismExchange Rate MechanismA system that was operated by some central banks within the European Union, which intervened in exchange markets to limit the fluctuations of their currencies relative to one another, while letting all of them collectively float. South African Futures Exchange (SAFEX)South African Futures Exchange (SAFEX)Electronic futures and options exchange based in South Africa. Malaysia Commodity ExchangeMalaysia Commodity ExchangeA subsidiary of the KLSE that trades interest rate futures on the three-month Kuala Lumpur Interbank offered rate. Surveillance department of exchangesSurveillance department of exchangesA department that monitors trading activity on an exchange in order to identify any unusual activity that may indicate illegal practices. Further SuggestionsExchange rate exposureorganised securities exchange Flexible exchange rate Organized exchange Bilateral exchange rate Exchange rate determination Exchange Price Input Computer code Nagoya Stock Exchange Favorable exchange rate Warsaw Stock Exchange Hong Kong Futures Exchange (HKFE) Exchange rationing New York Futures Exchange (NYFE) Exchange rate Foreign exchange market Exchange of stock Forward exchange Freely floating exchange rate system Exchange-market intervention European Options Exchange (EOE) Swiss Options and Financial Futures Exchange (SOFFEX) Baltic Exchange Principal Exchange Rated Linked Securities (PERLS) Forward exchange rate Tradepoint Investment Exchange |
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