An ETF (Exchange-Traded Fund) is a type of investment fund that is traded on stock exchanges, similar to individual stocks. It’s designed to track the performance of a particular asset or group of assets, such as stocks, bonds, commodities, or a combination thereof.
A “spot ETF” typically refers to an ETF that aims to replicate the performance of an underlying asset in real-time. It aims to reflect the current price or value of the assets it tracks. These types of ETFs are designed to closely mirror the movements of their underlying assets, and their prices are usually updated continuously throughout the trading day as the value of the assets changes.
For instance, a spot ETF that tracks the S&P 500 index would ideally move in sync with the S&P 500’s movements throughout the trading day. This is different from some other ETFs that might not track the live market prices of their underlying assets as frequently.
ETFs, including spot ETFs, offer investors diversification, liquidity, and often lower fees compared to traditional mutual funds. They provide an opportunity to invest in a wide range of assets without needing to buy individual securities directly.