What Are Exchange Traded Funds or ETF?

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What are ETFs

source: http://aesinternational.com/rossnaylor/investment/

It’s in the news now. ETFs or Exchange Traded Funds are coming to the Philippines!

This is one of the things that I have been waiting. The Philippine Stock Exchange has no ETF unlike its counterparts in the US, Singapore, and the rest.

So what are ETFs?

Exchange Traded Funds are securities that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange

source: Investopedia.com

To simply put it an ETF is a basket of assets that is traded in an exchange as a single unit in the same manner as regular stocks.

In a way it is like a mutual fund because it is a group of assets but its different because it is not a pooled fund. Its value is not computed at the end of the day just like the mutual fund but rather its price fluctuates just like a regular stock traded in a stock exchange because its value is track against the stocks it is invested into.

The SEC now has a draft of the rules and regulation(click here to read the draft rules). Such move came about because of Republic Act No. 2629, otherwise known as the Investment
Company Act (“ICA”). The purpose of such act as quoted “if not eliminate the unfavorable conditions and harmful practices in investment companies that adversely affect the national public interest and the interest of investors”.

Aside from ETFs, we are still waiting for the full effect of the REIT.

Financial Freedom Advocate About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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