Resources: Exchange-Traded Funds
To determine if the fund(s) are an appropriate investment for you, carefully consider the funds' investment objectives, risk factors and charges and expenses before investing. There are risks involved with investing, including possible loss of principal.
As a pioneer in the creation of exchange traded funds (ETFs), the American Stock Exchange launched a whole new class of securities that has grown to more than $200 billion in assets. Today, the Amex remains the center of development and the global market leader, with more than 140 listed ETFs.
An exchange-traded fund is a mutual fund that trades like a single stock. Essentially, with ETFs, you enjoy both the flexibility of a stock and the diversification of an index fund. ETFs can also be bought on margin (money borrowed from your broker) and sold short. Unlike regular stocks, ETFs can also be sold short on a downtick (in a market that is moving down). In addition to having both the benefits of flexibility and diversity, the expense ratios for most ETFs are extremely low. While the expense ratios of ETFs are low, and the funds are generally very tax efficient, there are certain costs that are unique to ETFs. Since ETFs, like stocks, are bought as shares through a broker, every time an investor makes a purchase he pays a commission to his broker of $8 and up depending on the broker and the amount of shares purchased. One other potential cost/benefit for the ETF investor is unique to ETFs.
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