Finance Dictionary
ETF (Exchange-Traded Fund)
Definition
A type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges.
Deep Dive
An Exchange-Traded Fund (ETF) is a popular type of investment fund that holds a diversified portfolio of assets, such as stocks, bonds, or commodities, and typically tracks an underlying index like the S&P 500. Unlike traditional mutual funds, ETFs are traded on stock exchanges throughout the day, much like individual stocks, offering investors the flexibility to buy and sell at current market prices. This structure provides instant diversification and liquidity, making them attractive to a broad spectrum of investors looking for cost-effective exposure to various market segments.
Examples & Use Cases
- 1An investor buys shares of an S&P 500 ETF (e.g., SPY) to gain broad exposure to the U.S. stock market
- 2A trader buys a Gold ETF (e.g., GLD) to invest in physical gold without holding the commodity itself
- 3An investor purchases a technology sector ETF to focus on growth in the tech industry
Related Terms
Mutual FundIndex FundStock Market