Besides investing stocks or trading option which deals directly with a particular stock, there’s another method of trading with reduced risks. This concept involves putting some selected or all stocks into a basket to make a better weightage with much more reduced volatility. Enter ETF, short for Exchange Traded Funds, which are very popular in New York Stock Exchange (NYSE) or Nasdaq. Malaysia Stock Exchange was trying to emulate the same concept of trading opportunity.
ETFs are index funds that trade just like stocks minus the expensive price-tag. You can trade ETFs during the trading hour just like stocks. And if you’re not a high-risk investors who want to profit on the wave of the market trend, 
you might just want to opt for ETFs. You can read more from etfguide’s FAQ.
In U.S., ETF is normally setup by huge financial institutional such as The Vanguard Group or Barclays Global Investors to whom I always regards as the market-makers. They’re the specialists or professionals who know what they are doing and they have the financial strength to back such an ETF. Before ETF is setup, a detailed and precise composition of the ETF plus the procedures needed to be submitted and approval is needed from the SEC (Securities and Exchange Commission).
Amongst the popular ETFs are:
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Standard & Poor’s 500 Index Depository Receipts – also known as SPY which tracks the S&P 500 index measuring the large-capitalization of U.S. stock market performance.
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Standard & Poor’s MidCap 400 SPDRs – or MDY which tracks the S&P Mid-Cap 400 index measuring performance of mid-size companies to complement the S&P500.
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Nasdaq-100 Index Stock – better known as QQQ which includes the largest 100 technology stocks listed on the Nasdaq. It is the benchmark for the hardware, software, telecommunication and bio-technology companies.
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Vanguard Total Stock Market ETF or VTI
If you buy into ETF such as iShare Dow Jones U.S. Total Market Index for example, you’re investing every publicly traded stock in the United States into your portfolio. In short you if you think technology stocks’ growth are likely to slow but that financial companies are likely to pick up, you can sell your technology ETF and move into an ETF of financial companies.
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May 15th, 2007 by financetwitter
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