The exchange-traded fund is a security that tracks an index, sector, commodity, or another asset, which can be purchased or sold on a stock exchange the same as a regular stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.

A well-known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index.1 ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types. An exchange-traded fund is marketable security, meaning it has an associated price that allows it to be easily bought and sold.

An exchange-traded fund (ETF) is a basket of securities that trade on an exchange, just like a stock.

ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds that only trade once a day after the market closes.

ETFs can contain all types of investments including stocks, commodities, or bonds; some offer U.S. only holdings, while others are international.

ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually.

An ETF is called an exchange traded fund since it’s traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close. Additionally, ETFs tend to be more cost-effective and more liquid when compared to mutual funds.

Happy Investing!