Explore Your Options by Tom Gentile
What are ETFs? Can you give me a quick ETF 101 course?
“ETF” is short for “exchange traded fund.” These investment vehicles trade on the US stock exchanges, mostly the
American Stock Exchange. Each ETF holds a group or basket of stocks. Some hold the same stocks that make up a popular index. For example, the Dow Jones diamonds (DIA) is an ETF that holds the same 30 stocks as the Dow Jones Industrial Average (DJIA).
Other ETFs are created to track specific sectors or asset classes. The Semiconductor HOLDRS (SMH) is an example of a popular sector fund. As another example, the iShares Russell 2000 Small Cap ETF (IWM) is one of the most actively
traded ETFs today. It holds shares of smaller companies (by market value).
There are literally thousands of ETFs to choose from today. One way to start is to look for lists of the most actively
traded exchange traded funds and ETF options. The information is available on popular websites, including the investing section of Yahoo! Finance as well as the exchanges where ETF options trade (the Chicago Board Options Exchange, the American Stock Exchange, the International Securities Exchange, and the Philadelphia Stock Exchange).