The ETF: Trade It Like a Stock, Hold It Like an Index Fund
About this episode
In this episode, Andy explains the concept of ETFs, their history, and how they differ from index mutual funds.
In this episode of Money Lessons, Andy explains the exchange-traded fund — the ETF — the vehicle most people now use to own a whole index in a single trade. He traces it back to the first one, State Street's SPDR, launched in 1993 to track the S&P 500, and shows how an ETF differs from the index mutual fund Jack Bogle created in 1976: one trades all day on an exchange like a stock, the other prices just once, after the close. Andy pulls back the curtain on the creation-and-redemption process — the quiet arrangement with large firms that does the real index buying and keeps an ETF's price tied to the value of the stocks it holds. The takeaway: an ETF lets you trade like a stock, but the soundest way to own one is to hold it like a long-term investor. AndrewTemte.com
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