The financial acronym ETF stands for Exchange Traded Fund, an investment fund which trades like a stock on a stock exchange. Most ETFs generally track a stock index.
For example, the ETF combines mutual fund valuation methods with a closed-end fundís tradability. In the primary market, only large institutional investors are allowed to trade shares of an ETF with a fund manager. The trading is done in creation units which consist of thousands of shares of the ETF that can be traded for baskets of the underlying securities. Trading of ETFs is also done on the retail level. The secondary market, which consists of major stock exchanges, offers customers the ability to trade ETFs. Most ETFs track stock indexes, although ETFs are now available which track commodities and precious metal prices.