History

• ETFs became available to the market in the 1990s. The early ETFs offered investors the ability to make use of international markets. Currently investors also have options to buy groups of stocks in a limited market area, and choices for investors continue to increase.
  
  

Identification

• Portfolios for ETFs can contain securities in international markets and U.S. equity markets. The contents include bonds, stocks, commodities and specialized areas such as semiconductor technology. Their value is based on indexes that follow various aspects of the market. There are also ETFs that deal in precious metal and emerging fields.
  These are index funds or trusts and are listed on the stock exchange but they are treated as a single stock. They are traded as though they are a single stock.
  They are day traded on a stock exchange just like closed-end funds, but at prices generally approximating the ETF's net asset value. A closed-end fund is a fund in which the number of shares issued is limited.
  
  

Benefits

• Advantages are day trading where pricing can be advantageous for selling short or buying on margin.
  An ETF portfolio can be set up in order to be traded in a stock market without difficulty. They offer diversification through their design of copying a certain index or sector.
  ETFs are clear when it comes to understanding what the securities are that are purchased.
  
  

Warning

• Even though ETF portfolios can be set up to cover a wide range of investments they are not risk proof. Long term financial goals still need to be considered.
  
  

Considerations

• ETFs appear to be similar to mutual funds but there are distinct differences.
  Purchases of ETFs by investors are usually of group securities which the ETF portfolio contains. In order to sell ETF shares investors have the options of selling to other investors. The ETF usually gives investors the securities such as stocks instead of actual cash. As a result of this limitation on redeeming the investment ETFs can not be classified as mutual funds.
  Mutual fund dealings happen after the stock market closes for the day.