What is an Exchange traded fund, and what are the benefits of investing in them instead of stocks/mutual funds

Question

What is an Exchange traded fund, and what are the benefits of investing in them instead of stocks/mutual funds

Answer 1

At first glance, Blooberg one seems to best answer your questions

http://www.bloomberg.com/markets/etfs/et...

http://www.investopedia.com/terms/e/etf....

http://money.cnn.com/2005/05/31/funds/et...

http://finance.yahoo.com/etf/education

Answer 2

An exchange-traded fund (ETF) or exchange-traded note (ETN) is a trust that trades on a major exchange throughout the day.  It is based on an underlying index - since you can't invest in indexes, you can invest in these funds.

What differentiates these over mutual funds is liquidity.  The majority of mutual funds price once daily.  ETFs / ETNs price throughout the day - in fact, they trade like stocks.

It's a cost-effective way for investors to diversify their portfolios.   My favorite ETF website is http://www.etftrends.com

This permalink help explains the difference - http://www.etftrends.com/2008/06/mutual-...