Exchange Traded Funds (ETF)
Exchange Traded Funds (ETF)
An ETF is traded like a regular stock, but instead of shares representing a company, they represent an index of stocks. They have become popular because they give diversity similar to a mutual fund, but they do it with lower expenses and more flexibility in trading since they can be traded anytime during the day, just like a stock. The first ETF was established in 1993 when the spiders (SPDR) started trading, representing the stocks in the S&P 500.
SPY (SPDR, spider)
The Standard & Poor's Depositary Receipt (SPDR) was was established in 1993 as the first ETF. It is traded as a regular stock on the American Stock Exchange under the symbol SPY. This security represents the stocks in the S&P 500, with dividends distributed quarterly based on the accumulated stock dividends held in trust, less any expenses of the trust. Each share trades at a price that is about 1/10 of the S&P 500 Index.
QQQQ (Cubes, Qs)
QQQQ is the symbol for the ETF tracking the stocks in the Nasdaq 100 index, with low operating expenses. This gives diversity, weighted toward technology companies, but with more flexibility in trading since they can be traded as a single stock anytime during the day.
Diamonds (DIA)
DIA is the symbol for shares in a trust representing the thirty stocks in the Dow Jones Industrial Average, traded on the American Stock Exchange like a regular stock.
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