How do exchange-traded funds (ETFs) operate on Wall Street?

Exchange-traded funds (ETFs) are a popular investment vehicle that operate on Wall Street. ETFs allow investors to buy and sell shares of a diversified portfolio of assets, such as stocks, bonds, or commodities, just like a stock.

ETFs are traded on stock exchanges like individual stocks, and their prices fluctuate throughout the trading day as investors buy and sell shares. ETFs are created and managed by investment companies, who own the underlying assets and issue new shares of the ETF in exchange for the underlying assets.

ETFs are generally passively managed, meaning they track a particular market index or sector, such as the S&P 500 or the technology sector. This passive management results in lower fees compared to actively managed funds, which are managed by professional fund managers who attempt to outperform the market. However, ETFs also offer exposure to a particular asset class or sector, allowing investors to diversify their portfolio without having to purchase multiple individual securities.

ETFs offer several advantages over traditional mutual funds, such as lower fees, greater liquidity, and the ability to trade intraday. ETFs also offer a wide variety of investment options, including domestic and international stocks, bonds, and commodities.