A few popular ETFs you should know about
An exchange-traded fund or ETF is a form of an index fund that provides investors with a standard return at a minimal cost though it differs from index funds in that trading in ETFs is commission free while index funds make for expensive trading. An ETF is also like a mutual fund except that it trades on major stock exchanges. ETFs make for appealing investments because of their low costs, tax efficiency, and features that resemble stocks in trading and functionality. From the time that they were first introduced in 1993, they have caught on like wildfire with about $2 trillion invested in them. As of 2015, ETFs have 1,800 products on offer across every market sector, niche and trading strategy. The best ETF funds are not expensive. A difference of a few dollars, however insignificant they may seem at the time, will make a sizeable difference in the long-term returns. The expense ratio determines the cost of an ETF. For instance, an expense ratio of 0.5% signifies that $5 has to be paid every year for every $1,000 invested. The best ETF funds also have to do a good job of tracking the market index they are intended for.