An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
There’s a lot of hype around exchange-traded funds (ETFs) as a new, improved way to invest. In fact, they aren’t all that different from regular mutual funds. Like mutual funds, they pool together investors’ money to buy a diversified portfolio of stocks or bonds. The only difference is that instead of buying an ETF directly from a fund company, you buy a share of it through a brokerage, just like you would a stock.