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GlossaryReference

ETF

A basket of many investments that trades on a stock exchange like a single share.

What ETF means

An ETF (exchange-traded fund) holds a collection of assets — often hundreds or thousands of stocks or bonds — and trades on stock exchanges just like a company share. ETFs let you own a slice of a whole market with one purchase, which makes diversification simple and inexpensive. Many ETFs have low fees and can be bought with no minimum beyond the price of one share.

Example

Instead of buying stock in one company, an ETF tracking the S&P 500 gives you exposure to 500 large US companies in a single purchase.

Related terms

Index FundDiversificationCompound InterestLiquidity

Disclaimer

Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.

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Frequently asked questions

Both hold baskets of investments. The practical differences are mainly how they trade: an ETF is bought and sold on an exchange throughout the day at market prices like a stock, while a mutual fund trades once a day at its net asset value and often accepts any dollar amount. Fees, minimums and what the fund actually holds usually matter more to long-term investors than the structure itself.

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