ETF (Exchange-Traded Fund) — Financial Glossary
Definition: A type of investment fund that trades on stock exchanges and holds a basket of assets like stocks, bonds, or commodities.
What is an ETF?
An Exchange-Traded Fund (ETF) is a type of investment fund that holds a collection of assets — such as stocks, bonds, or commodities — and trades on a stock exchange just like a regular stock. ETFs offer instant diversification at a low cost.
ETF vs. Mutual Fund
| Feature | ETF | Mutual Fund |
|---|---|---|
| Trading | Throughout the day | Once per day (after market close) |
| Minimum investment | Price of 1 share | Often $1,000+ |
| Expense ratios | Usually lower | Usually higher |
| Tax efficiency | Generally more efficient | Less efficient |
Popular ETFs
Some of the most popular ETFs track major indices like the S&P 500 (e.g., SPY, VOO) or the total stock market (e.g., VTI).