Since exchange-traded funds (ETFs) were first introduced in 1993, interest in them has grown steadily. In one year alone, ETF assets increased by a staggering 49% to reach $588.2 billion.

Although ETFs resemble index mutual funds, they actually have a lot in common with individual shares of stock. ETFs can be purchased on margin, sold short, and traded any time the markets are open. If you are seeking an investment that can offer the benefits of both mutual funds and stocks, an ETF may be an option to consider.

An ETF is a passively managed portfolio of securities that is initially sold by an investment company and thereafter traded in individual shares on a stock exchange. The underlying securities may all be from a certain sector or country, or they may track a broad market index.

Taking Stock

ETF share prices are more likely to be based on the demand for the shares themselves

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