Exchange-traded funds (ETFs) are an investment fund that own assets and are traded on a stock exchange, similar to stocks. Investors who buy ETFs own a unit of the fund. Being a unit holder you indirectly own the fund’ assets.
ETFs are designed to produce a return of a specific index such as stocks (e.g. STI), bonds (e.g. ABF), currency, commodity (e.g. GLD) or even an investing style.
The first ETF was started in Aug. 31, 1976 by Jack Bogle, the founder of Vanguard. It was a revolutionary and unorthodox investment concept at the time as the investment industry was dominated by the mutual funds which practiced active equity management (i.e portfolio managers make buy and sell investment decisions).
Jack Bogle believed that passive management (index investing) would outpace active management and in return provide higher returns to investors because of its efficient cost structure ......