Introduction

An exchange-traded fund (ETF) is an investment fund that holds multiple underlying assets. It can be bought and sold on an exchange, much like an individual stock. ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of stocks—even specific investment strategies.

How it works

Conclusion

Exchange-traded funds represent a cost-effective way to gain exposure to a broad basket of securities with a limited budget. Investors can build a portfolio that holds one or many ETFs. Instead of buying individual stocks, investors buy shares of a fund that targets a representative cross-section of the wider market. However, there can be additional expenses to keep in mind when investing in an ETF.