An Exchange Traded Fund is like a cross between a mutual fund and a stock.

ETFs are often used in a number of Harvest’s Investment Models. They’re helpful because they provide diversification, can mimic indices, and are generally inexpensive. An Exchange Traded Fund is like a basket of stocks. Often times there can be hundreds or even thousands of individual stocks within a single ETF. This is why it’s often described as a cross between a mutual fund and a stock.

The pool of securities that build the makeup of an ETF vary from fund to fund. Many ETFs often follow some kind of rule that determines which underlying securities get added or removed from the fund. We often like to use the ETFs that represent the major indicies, such as: the S&P 500, NASDAQ 100, Russel 2,000, and the Dow Jones Industrial Average.

If you want to go even more in-depth on what an ETF is, we suggest you take a look at Investopedia’s Helpful Wiki on Exchange Traded Funds. You can also give your adviser a call and they would be more than happy to help explain in more detail. If you don’t have an adviser, please don’t hesitate to reach out to us by giving us a call at (630) 613-9230.