ETF (Exchange-Traded Fund)
A basket of securities that trades on an exchange like a stock.
Definition
An Exchange-Traded Fund (ETF) is a type of investment fund that holds a collection of assets (stocks, bonds, commodities, or a mix) and trades on stock exchanges just like individual stocks. ETFs offer diversification similar to mutual funds but with the flexibility of intraday trading, typically lower expense ratios, and greater tax efficiency. Popular ETFs track indices like the S&P 500 (SPY, VOO), Nasdaq-100 (QQQ), or total stock market (VTI). ETFs can be passively managed (tracking an index) or actively managed. They have become one of the most popular investment vehicles, with over $10 trillion in global assets.
Related Terms
Mutual Fund
A pooled investment vehicle managed by professionals that invests in stocks, bonds, or other securities.
InvestingIndex Fund
A mutual fund or ETF designed to track the performance of a specific market index.
InvestingExpense Ratio
The annual fee charged by a fund to cover operating expenses, expressed as a percentage of assets.