An exchange-traded fund, or ETF, is one of the many available financial instruments traded on stock exchanges across the world. It works similar to a mutual fund, where an undivided interest in a pool of securities, and other valuable assets such as stocks, commodities or bonds are made available to the public. The only difference mainly against a mutual fund is that ETFs can be sold and bought anytime during the day unlike mutual funds which can only be bought and sold at the end of the trading day. Aside from the buying flexibility, investors count ETFs attractive mainly due to tax efficiency, lower costs of trading, tax efficiency, transparency and a very good chance for market exposure and diversification.
There are different type of ETFs available in financial markets, the most common being Index ETFs. Other types include Commodity ETFs, Bond ETFs and Currency ETFs. Currency ETFs have been traded increasingly recently as ETFs make it easier to mitigate market risk by hedging against currencies. As currency ETFs make it easier to enter into the Forex market. ETF managers would trade currency positions in a fund and open shares of that fund to the public. One of the more popular Currency ETFs is Swiss Franc (CHF) ETF. CHF is believed to be the fifth most traded currency in the world, and is also acknowledged across markets as a safety currency, given Switzerland’s stable economic conditions. One can trade CHF ETFs via the FXF, which allows investors to hold positions on the CHF. Rydex Investments launched the FXF (CHF) in June 2006 and has been managing it since. Whether Rydex managed it well or the CHF is just stable in itself, the FXF (CHF) has been fairly doing well since it was launched. The FXF (CHF) is one of the most traded currency ETFs found elsewhere, registering a fair amount of volume traded each day. Even when other European countries were seen as unstable, like with Greece recently, the Swiss Franc continued to register higher demand, showing market confidence on the currency.