Regarding the ETFs of Solana, Ethereum, and XRP, I wanted to investigate what they meant, since they are mentioned quite often in news media and communities.
Here I share what I found:
ETFs or exchange-traded funds are hybrid investment instruments between funds and stocks, in such a way that they combine the diversification offered by a fund's portfolio with the flexibility of being able to enter and exit that fund with a simple operation in the stock market.
ETFs are, therefore, investment funds whose shares are traded and settled exactly like stocks. Unlike shares of traditional funds, which can only be subscribed or redeemed at their net asset value (total value of the fund's portfolio - expenses / number of shares) that necessarily is calculated after the close of each session, ETFs are bought and sold on the stock market, like any stock, with the same commissions.
The second fundamental characteristic of ETFs is that they are index funds, meaning their investment policy consists of replicating the behavior of a specific benchmark index (IBEX 35, DJ EuroStoxx 50, Nasdaq 100, DJ Industrial Average, IBEX Medium Caps...). As the supply of indices has increased, so has the variety of ETFs.
The liquidity of ETFs is essentially the same as the portfolio of securities that make up their benchmark index, and access to this liquidity is guaranteed by the figure of specialist intermediaries who undertake the commitment to offer buy and sell prices for the ETF shares at all times throughout the session. Both the difference between these prices (spread) and the depth, or volume of shares offered or demanded, must maintain parameters that are established prior to their admission to listing and whose compliance is supervised by the stock exchange.
ETFs have opened up a whole new range of investment opportunities for both individual investors and institutional managers, as they allow exposure to countries, regions, sectors, and various asset classes through a simple operation in the stock market, in real time and at a lower cost than many other investment vehicles.
In another article, I will share information about the Solana ETF $SOL #ETFEthereum $ETH
