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Understanding the Legal Definition of Exchange-Traded Fund [ETF]
Definition & Meaning
An exchange-traded fund (ETF) is a type of investment fund that is traded on stock exchanges, similar to individual stocks. ETFs hold a collection of assets, such as stocks or bonds, and aim to track the performance of a specific index, like the S&P 500. Investors can buy and sell shares of an ETF throughout the trading day at market prices, which fluctuate based on supply and demand. This makes ETFs a flexible option for investors seeking diversification in their portfolios.
Table of content
Legal Use & context
ETFs are commonly used in investment and financial planning. They fall under the purview of securities law, which governs the buying and selling of financial instruments. Legal professionals may encounter ETFs in various contexts, including:
Investment management
Tax planning
Retirement accounts
Individuals can manage their investments in ETFs using legal templates and forms available through services like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Here are a couple of examples of popular ETFs:
iShares Core S&P 500 ETF (IVV): This ETF aims to track the performance of the S&P 500 index, providing exposure to 500 of the largest U.S. companies.
Vanguard Total Stock Market ETF (VTI): This ETF seeks to track the performance of the entire U.S. stock market, including small-, mid-, and large-cap growth and value stocks.
Relevant laws & statutes
ETFs are primarily governed by the following regulations:
Investment Company Act of 1940
Securities Exchange Act of 1934
Regulation S-K
Comparison with related terms
Term
Definition
Key Differences
Mutual Fund
A pooled investment vehicle managed by professionals.
Mutual funds are typically bought at the end of the trading day, while ETFs trade throughout the day.
Index Fund
A type of mutual fund designed to follow a specific index.
Index funds are usually mutual funds, while ETFs can be structured as index funds but trade like stocks.
Common misunderstandings
What to do if this term applies to you
If you're considering investing in ETFs, here are some steps to take:
Research different ETFs to understand their performance and fees.
Consult with a financial advisor if you're unsure about your investment choices.
Explore US Legal Forms for templates related to investment agreements or financial planning.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.