The ABCs of Trading a New ETFMay 31, 2017

Key Points

The ABCs of Trading a New ETF

As the name implies, ETFs are mutual funds that trade on an exchange. Like mutual funds, they offer diversification benefits and exposure to a specific asset class. Similar to stocks, they allow for intraday trading on an exchange.

Many of the world’s largest and oldest ETFs can trade hundreds of thousands—and sometimes millions—of securities on any given day. As new investors look to purchase the ETF, there are numerous existing investors who could potentially sell. These ETFs typically have high average daily trading volumes and tight bid/ask spreads, the difference between the price a buyer is willing to pay (bid) for a security and the seller’s offering price (ask).