ETF (Exchange-Traded Fund)
An ETF (exchange-traded fund) is an investment fund that holds a basket of assets — such as stocks or bonds — and trades on a stock exchange throughout the day, just like an individual stock.
Why it matters
- A single ETF purchase can provide exposure to hundreds or thousands of underlying securities.
- ETFs are generally transparent about their holdings and typically have lower costs than actively managed mutual funds.
- ETFs can be bought and sold any time markets are open, unlike traditional mutual funds which price once per day.
Simple example
- A broad-market ETF might hold all (or most) of the stocks in a major index in a single fund.
- A bond ETF might hold hundreds of individual bonds, giving instant diversification across issuers and maturities.