Definition:
Exchange Traded Fund or ETF is special
kind of a mutual fund, which is created and issued by a fund house, whose units
are listed on stock exchanges alongside stocks and freely traded like stocks.
The ETFs are created based on various underlying assets like stocks, bonds,
gold, commodities, or a popular index like ‘BSE Sensex’. The advantage over
mutual fund units is that the investor need not approach the mutual fund for
redemption and can simply sell on the stock exchange, bringing liquidity to the
instrument. The fund management charges are also lower compared to mutual funds
since ETFs are passive funds involving minimum time and efforts of fund
managers.
Example:
 |
| A Few ETFs of Goldman Sachs |
