ETF definition

ETF stands for Exchange Traded Fund. Whenever I start explaining what the letters ETF stand for I will come across some discrepancies as one is naming many products an ETF when that is not exactly right. Some products that are named an ETF are in essence brothers or sisters of the real ETF.

Here I will explain what kind of ETF’s do exist and which abbreviations you should use for them. But first we are going to start with a different name for an ETF as they are sometimes called trackers. Trackers that invest in an index are called Index Trackers, but in fact they are real ETF’s.

Today ETF is the general name used but in fact that is not entirely correct as an ETF is in essence an ETP, an Exchange Traded Product. You will not often encounter the abbreviation ETP, instead they use the word ETF, but here I will get into the nitty-gritty of the word ETF. So here we go, I explain how we should be talking about ETF’s (now I am making the same mistake).

The umbrella name for all Exchange Traded Products is an ETP. Under this general name ETP you will find 3 sorts of ETP’s:

ETF, short for Exchange Traded Fund

We will call something an ETF when the underlying assets are stocks. This may consist of groups of stocks but also complete stock indices.

ETC, short for Exchange Traded Commodities / Currencies

So, an ETF is the same thing as an ETF but the underlying assets are not stocks but commodities or currencies.

ETN, short for Exchange Traded Notes

An ETN also functions as a regular ETF but the assets of an ETN are bonds or all sorts of debt paper.

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