efts

EFTs most commonly refer to Exchange-Traded Funds, investment funds that hold a diversified portfolio of assets and trade on public stock exchanges. ETFs are designed to track the performance of a specified index, commodity, or basket of assets, and they combine features of mutual funds with the intraday liquidity of stocks.

Each ETF issues shares through an arrangement with authorized participants and can create or redeem shares in large blocks in exchange for the underlying securities or cash. This creation/redemption mechanism helps keep the ETF's market price in line with the value of its holdings. Most ETFs are passively managed, seeking to replicate an index; others are actively managed, and some use derivatives to synthetically achieve exposure.

Investors benefit from broad diversification, transparent pricing, and relatively low expense ratios compared with traditional mutual funds. ETFs trade like stocks, allowing intraday trading, limit orders, and tax efficiency due to in-kind transfers.

Risks include tracking error between ETF and underlying index; market, sector, or liquidity risk; and for synthetic or leveraged ETFs, additional counterparty or compounding risks.

ETFs have grown since the early 1990s; the first widely traded ETF was the SPDR S&P 500 ETF launched in 1993. In the United States they are regulated as either open-end investment companies under the Investment Company Act or by the SEC; globally they are governed under local regimes such as UCITS in Europe.

Note: EFTs can also refer to Electronic Funds Transfers or Emotional Freedom Techniques, depending on context. This article focuses on Exchange-Traded Funds.