If you invested in an exchange-traded fund – an ETF – and it closed tomorrow, would you lose all your money?
I’m Keith DeGreen and this is your Investors Minute.
The good news is that almost all ETFs definitely have value — called their “net asset value”. It’s the value of the actual stocks, bonds or commodities they hold. Like all investments they may be subject to market risk, but their underlying value is very real.
An ETF faithfully tracks the price performance of an underlying index. An index like the S&P or the DOW is just a set of numbers – a spreadsheet, really, that tracks the price performance of its components on paper – not in the real world.
But ETFs are real-world investments, with real-world holdings. If your ETF closed tomorrow they would liquidate those holdings and send you the cash.
I’m Keith DeGreen. This has been your Investors Minute
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