Exchange-Traded Fund (ETF)

An Exchange-Traded Fund (ETF) is an investment fund that holds a diversified portfolio of assets such as stocks, bonds, commodities, or other securities and is traded on stock exchanges like a single stock. ETFs offer investors a cost-effective and convenient way to gain exposure to a wide range of asset classes, sectors, or markets without the need to buy individual securities. ETFs can track indices like the S&P 500, focus on specific sectors, or follow active management strategies. ETFs are known for their liquidity, transparency, and low expense ratios compared to traditional mutual funds, making them popular among both retail and institutional investors.

Example

The SPDR S&P 500 ETF (SPY) tracks the performance of the S&P 500 Index, allowing investors to invest in a broad range of large U.S. companies.