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Exchange Traded Funds (ETF)

An Exchange Traded Fund (ETF) is a type of pooled investment security that operates much like a mutual fund that allows several investors to put together sums of money into a collective scheme spread across many investment assets. ETFs are baskets of financial instruments ranging from stocks, bonds, precious metals, and other assets. They mimic the performance of the underlying index whereas actively managed ETFs attempt to outperform the underlying index. For example, an ETF that tracks the performance of the Dow Jones Industrial Average Index will consist of the same shares, of the thirty large companies listed at the NYSE, in the same proportions. ETFs are traded on the stock exchange just like stocks, usually through brokers or online trading platforms. Investors find them attractive as the funds track world-known indices such as S&P 500, offer low operating costs, trade on margin, and offer the potential to profit from both rising and declining markets.

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