What are ETFs?

An ETF (Exchange Traded Fund) is an investment vehicle that is traded much like a regular stock but is considered a mutual fund.  An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day.

An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value.  Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999.

These ETFs are usually comprised of a specific sector or industry, such as gold or silver.There is an ETF called Spider Gold Shares (GLD) that tracks the daily price of the commodity.  There all sorts of different ETFs that you can use.  Silver has one with I Shares Silver Trust (SLV), oil has United States Oil (USO), and Platinum (PGM) just to name a few.  These ETFs have also likely been used by investors trying to hedge.

Some ETFs, however, have been said to manipulate the heavy selling pressure seen in the market over the last year.  Many investors have been trading “short” ETFs usually at the end of the trading day to drive the market down.

Trading in futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.