Exchange traded funds (ETFs) are index funds or trusts that are listed on an exchange and can be traded in a similar fashion as a single equity. The first ETF came about in 1993 with the AMEX's concept of a tradable basket of stocks -- the Standard & Poor's Depositary Receipt (SPDR). Today, the number of ETFs that trade options continues to grow and diversify. Investors can buy or sell shares in the collective performance of an entire stock portfolio - or a bond portfolio -- as a single security. Exchange traded funds allow some of the more favorable features of stock trading, such as liquidity and ease of equity style features to more traditional index investing.
Are funds that track an index but can be traded like a security. SPDR (Spiders), which tracks the S&P 500 index, is the first ETF.
Also known as ETF. A basket of stocks similar to an index mutual fund. However, there are a number of important differences between ETFs and mutual funds. The ETF can be traded within the day, they can be shorted, purchased on margin and there even exists options on some ETFs.