Exchange-traded funds are investment trust funds which track the Nikkei Stock Average and other stock indexes. Like individual stocks, the funds are listed on securities exchanges and can be bought and sold at brokerage firms at fees lower than those for ordinary investment trusts. ETFs began trading in Japan in July 2001, with 19 funds listed by September 2002. Their combined net assets grew sixfold to about 2 trillion yen through September 2002. Financial institutions with hefty stock portfolios are pushing ahead with selling shares cross-held with business partners in an effort to prevent wild price swings on the stock market from affecting their balance sheets. Fearing that selling these shares directly on the market will erode the stock prices of individual companies, the institutions often sell them to brokerage firms, which then use the shares to set up ETFs to be sold to individual investors.
a fund that is traded on a liquid stock exchange like a share. Investors are able to buy and sell shares in an exchange traded fund through a broker or financial adviser.
a type of an investment company (either an open-end company or UIT) whose objective is to achieve the same return as a particular market index. ETFs differ from traditional open-end companies and UITs, because, pursuant to SEC exemptive orders, shares issued by ETFs trade on a secondary market and are only redeemable from the fund itself in very large blocks (blocks of 50,000 shares for example).