Keeping It Simple With ETFs

Bloomberg L.P., London (Photo credit: Wikipedia)

Innovation is a good thing but can it be taken too far? The exchange traded fund business started with simple index funds pegged to popular benchmarks. However, the industry has morphed into debt notes and  derivatives-based tools.

“Derivative-based ETPs and ETNs have swelled since they were introduced in 2006,”Bloomberg reports.

State Street Global Advisers launched the first exchange traded fund in 1993, theSPDR S&P 500 (NYSEArca: SPY), giving investors the diversification benefits of a total portfolio at a very reasonable cost. Over the past 20 years, the industry has transformed, with “exchange traded products” taking over the landscape. [What is an ETF? - Part 12: ETNs]

The exchange traded note, an offshoot of an ETF, includes debt securities, or notes, taking the place of stocks in the index. Traders have also enjoyed tools that give double or triple the returns of a traditional fund and even the ability to play on fear or volatility, reports Kyle Woodley for InvestorPlace. [If You Don't Understand How an ETF Works, Don't Buy It]... Continue to read.

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