what is the concept of exchange traded funds?

Answer 1

The concept is to match the performance of some stock market index or sector, like an Index Fund, but trades like a stock, meaning, it fluctuates in price throughout the day.

One of the most widely known ETFs is called the SPDR (Spider), which tracks the S&P 500 index and trades under the symbol SPY. Before the ETF, there was no way to buy the S&P 500 Index without buying all 500 stocks in the index, or buying a leveraged position in futures or options.

Because it trades like a stock whose price fluctuates daily, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.

By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

Answer 2

For decades was just close-end funds which were mutual funds traded as stocks. Still some around & often sell at nice discount to asset value vs premium for mutual funds. ADX & PEO are buys. Now has been expanded to give a way to buy an index or industry in 1 step as a stock. ETFs generally sell at little discount or premium. IAU - holds physical gold - 1 of special interest right now.

Answer 3

this may help :
http://www.nseindia.com/content/products/prod_etfs.htm