HOUSEKEEPING
Exchange-traded funds primer
Exchange-traded funds, or ETFs, are a fast-growing segment of the mutual-fund business, in large part because they offer investors better control at a low cost. Effectively, ETFs are built like an index fund — mimicking the strategy of a benchmark — but trade minute-by-minute like a stock.
The proliferation of ETFs, including a wide range of new options based on quirky or unusual investment strategies, has left some investors struggling to decide if this is an investment vehicle they want to buy or some gimmick that’s not here for long.
To learn more about ETFs, Rydex Investments has created “ETFEssentials,” a page on its website (rydexinvestments.com) that gives a soup-to-nuts explanation of ETFs, including information on pricing, liquidity and more.
SHORT COURSE
Limit order
A limit order is an instruction to a stock or commodities broker to make a purchase or sale at a specific price. The trade is executed only when the security hits the target price.
If, for example, Widget Co. trades for $11 a share and you place a limit order to buy 100 shares at $10, the broker won’t make the purchase until the price drops $1. If you buy the stock, you might then place a limit order to sell at $15 a share, a directive triggered only when Widget stock reaches that level. A stop-loss order tells the broker to sell the security at a level below the current market price, offering protection if the stock or commodity price starts falling.
