Ready to begin your ETF journey?
In this episode of our ETFs Explained series, learn about different trading methods and opportunities.
Exchange-traded funds (ETFs) can be bought or sold in securities exchanges just like stocks. They can be traded during the trading day either on-screen through brokers or online platforms, or off-screen through brokers. They differ from mutual funds, which are only bought via a platform or from an issuer at the end of the day price called the net asset value (NAV). The NAV is the value of the underlying securities.
ETFs have both a NAV and a market price. The market price is calculated by market makers throughout the trading day and is primarily based on the value of the underlying securities. It is also influenced by factors such as investor demand and supply, creation fees, and hedging.
The two prices slightly differ from each other, and investors use various trading strategies to trade at a price as close to the NAV as possible.