Computerized Investing > January/February 2004

On the Internet: Exchange-Traded Funds

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Over the past few years, exchange-traded funds have grown in popularity as an alternative to traditional open-end mutual funds. Exchange-traded funds, called ETFs for short, are similar to open-end mutual funds in that they are a basket of stocks, but they trade on an exchange. In other words, they can be traded throughout the day through a broker just as if they were individual stocks with trading commissions charged. In contrast, open-end mutual funds are only traded at their closing net asset value. Exchange-traded funds come in a few different varieties, but the majority track broad-based indexes, sector groups, or international segments. ETFs are often favored by investors because of their tax efficiency, low costs and liquidity. See the October 2003 AAII Journal article titled “The Individual Investor’s Guide to Exchange-Traded Funds” for a complete list of the current ETFs and details on how they work.

Most of the information on exchange-traded funds comes via the fund sponsors and marketers. However, a few independent sites offer research, in-depth information, and ratings on the Internet. Here we list both.

ETF Connect

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