What Is ETF (Exchange-Traded Fund)?
A single investment that holds a basket of many assets — often tracking an index — and trades on an exchange like a normal stock.
An ETF bundles dozens or thousands of underlying holdings into one share you can buy or sell any time the market is open. Many ETFs simply track an index, giving you broad diversification in a single, low-cost purchase.
ETFs are close cousins of index funds. The main differences are how they trade (continuously through the day, like a stock) and often a very low expense ratio, which is why they are a common first building block for new investors.
Buying one share of a total-market ETF is like unlocking a bundle that contains a slice of hundreds of companies at once — instead of hunting and buying each one individually.
Key points
- One purchase gives you a whole basket of assets.
- Trades on an exchange throughout the day.
- Index-tracking ETFs usually carry very low fees.
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