The Exchange Traded Fund (ETF) is a financial instrument designed to passively track indices of stocks, bonds or commodities. The ETF invests according to a predetermined index.
The fund does not guarantee index-linked yield, and the investor's return can be higher or lower than the selected index, due to the fund's trading activity and deviations (usually small) in the composition of the fund's assets. The ETF is committed to making its best efforts to monitor the index, and therefore the ETF should yield a similar, but not necessarily identical return to the yield of the index it follows.
An ETF is a hybrid product because it is traded on the stock exchange similarly to any security traded on the stock exchange, and the fund can be purchased or sold through the stock exchange. At the same time, the investor has the option of buying or selling the ETF in a similar manner to open-end mutual funds (which are not traded on the stock exchange).
The ETF is subject to the Joint Investments Trust Law, similarly to mutual funds.
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