ETF - Exchange Traded Funds

Exchange Traded Fund, due to its characteristics, can be traded the same way as a conventional company is on a stock market. The difference is that we do not trade just one Stock, but a whole basket of assets that are focused on e.g. the health sector, precious metals, Asian region, the selected currency etc.. Besides, Exchange Traded Fund pays dividends of the bought companies to our business account. Despite the fact that ETF tries to follow exactly the evolution of the index/basket of assets, it is not certain that its profit will be absolutely identical to the evolution of the reference index. There can be some slight differences in the profits. You can look for some examples of ETF at this site of New York Stock Exchange here.

Trading ETF is similar to buying shares in mutual funds (it also consists of some selected shares). While mutual fund shares can be traded just once a day, the ETF can be bought and sold several times a day, using conventional trading orders. If you buy a mutual fund, the price of it is the same for the whole day, but if you buy an ETF, the price varies within the day.

ETF can be bought and sold through your broker. The broker will charge you fees for the orders, but the commissions are considerably lower than the entry fees for mutual funds.


Advantages of ETF: Diversification of the portfolio, the possibility of intraday trading, short selling, leverage, usually lower fees compared to mutual funds.

Note: In addition to the opportunity of Short Selling we can also use the Inverse ETFs. They are designed to move in the opposite direction to classical ETFs, which means that while e.g. the ETF of S&P 500 index would rise by 5%, an Inverse ETF would fall by 5%. Some investors prefer the Inverse ETF before Short selling of common ETF.