Exchange-traded fund

Exchange Traded Funds (or ETFs) have been available in the US since 1993 and in Europe from 1999. The 'idea' of ETF's is to put 'funds' and stock exchange trading into one product. Traditionally, 'funds' or cash and stock exchange investments have been carefully kept apart to reflect liquidity issues. An ETF is a pool fund invested with a stated investment objective , for example, a tracker fund for the energy sector or geographical area. Shares owned in this fund by investors are in turn traded on an exchange

ETFs were first introduced by the TORONTO Stock Exchange

The objective of an ETF is to participate in the economic growth of an industry or sector NOT available to the market in which the ETF is traded. Early US ETFs were set-up for example to participate in EU stocks or Companies. The performance of the fund is tracked by comparison to the growth index of the sector invested into. ETFs are distinct from UNIT TRUSTS and Investment Trusts. ETFs provide the attraction of the returns of a traditional tracker fund with the liquidity of a stock-exchange share.

http://en.wikipedia.org/wiki/Exchange_traded_fund