Stock market terminology is replete with opaque, intimidating and utterly confusing terms.
A simple initialism tops the list of terms that sends users scurrying to Google: ETF.
The abbreviation for exchange-traded fund was the most-looked-up financial term on Google, with people searching for that term on an average of 103,000 times per month. “IPO” and “broker” took second and third place, respectively, according to London-based trading firm CMC Markets.
“A lot of people find financial markets terminology baffling,” Michael Hewson, chief market analyst at CMC Markets, said in an emailed press release. “If you're looking to hone your interest in financial markets, it's a huge benefit if you can understand the language that gets used on a regular basis.”
Why the confusion? CMC’s statement doesn’t say. Maybe ETFs’ growing popularity is the reason. Assets in ETFs have grown by 85% in five years, to $5.95 trillion as of Oct. 12, 2022, from $3.4 trillion at the end of 2017, according to ETF.com data.
To save our readers from having to search the term, we thought we’d explain what ETF means.
“ETF” stands for exchange-traded fund, a fund that trades on exchanges and generally tracks a specific index, sector, commodity or other assets. ETFs can be purchased or sold on a stock exchange throughout the trading day the same way a regular stock can. Investing in such a fund lowers risk and exposure, and helps diversify portfolios.
The first ETF to be listed in the U.S. is the SPDR S&P 500 ETF Trust (SPY), which was launched in 1993 and is actively traded, generating top rankings for the largest assets under management and greatest trading volume.
With the price of natural gas spiking to 85% this year, it is no surprise the top-performing ETFs in 2022 are from the energy sector. Funds such as the United States Natural Gas Fund (UNG), the United States 12 Month Natural Gas Fund (UNL) and the iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ) have seen year-to-date returns of 87% and upward, according to ETF.com data.
Contact Zoya Mirza at [email protected]