What is an ETF?

An Exchange-Traded Fund (ETF) is a type of investment fund that is traded on a stock exchange, just like a regular stock. An ETF holds a basket of assets—such as stocks, bonds, or commodities—and typically tracks a specific index.

For example, an S&P 500 ETF holds shares in the 500 companies that make up that index. When you buy a share of that ETF, you are instantly invested in all 500 of those companies.

Key Benefits of ETFs:

• Instant Diversification: Buying a single ETF share can give you exposure to hundreds or even thousands of different stocks or bonds.
• Low Cost: ETFs are known for having very low expense ratios (annual fees) compared to traditional mutual funds.
• Tradability: You can buy and sell ETFs throughout the day at the current market price, just like a stock.

ETFs vs. Mutual Funds

While both offer diversification, the main difference is how they are traded. Mutual funds are priced only once per day, after the market closes. ETFs can be bought and sold at any time during the trading day, offering more flexibility.