Financial Terms / E - F / Exchange-traded fund (ETF)

Exchange-traded fund (ETF)

An Exchange-traded fund (ETF) is a basket of securities such as stocks, bonds, or commodities that operates like a mutual fund where investments are pooled together and offers diversification and easy trading with lower expense ratios (fees and costs).

They track a specific index, sector, or commodity, and the constituents of an ETF are selected based on specific rules. Unlike mutual funds, however, they can be bought and sold throughout the day.