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ETF as an alternative investment

December 22, 2013

ETF as alternative investment

PAM Rich Friends

Alternative Investments – Exchange Traded Funds (ETFs)
Exchange-traded funds (ETFs) are investment companies that are technically classified as open-end companies (although they are not considered to be or allowed to call themselves mutual funds). These are index funds that mirror the composition of standard indexes such as the NASDAQ 100 or the Russell 2000; it may also include broad market, sectors, single countries or regions as well as fixed income. They allow investors to buy or sell exposure to an index through a single financial instrument. They are like traditional funds in that they are a pool of money to be invested, however, unlike traditional funds, ETFs can be sold short or margined in the investor’s account. ETFs also differ from traditional open-end companies because ETF shares trade on a secondary market (as do closed-end funds) and are only redeemable in very large blocks (50,000 shares for example).

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