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What is an ETF?




ETFs have been become very popular in recent times. The first ETF was started in 1993 in the US. Since then they have caught on as more or less stock substitutes. Instead of tracking the performance of a company ETFs track the performance of products.

For example there is gold ETF, GLD, which will typically go up if the price of gold goes up. Right now there is an ETF for practically anything you want to buy it on.

The benefit of owning an ETF as opposed to a stock is that they are unaffected by company news. For example if you are bullish on OIL you decide to buy BZP an oil company. However if BZP suddenly becomes under government investigation their stock will go down. This is true even if the price of oil goes up.

If you bought the oil ETF USO you will make money if the oil commodity goes up. You do not have to be conserved about what will happen with a given oil company.

Commodity ETFs can also be a good way to handle inflation. If the price of the dollar is going up the price of silver and gold can be going up relative to the price of a dollar.

They can be bought on the open market just like stocks. You should be able to buy them through your broker just as easily as you buy stocks. If you are going to use ETFs be sure you trade them just like you would a stock. The rules do not change.


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