A basket of securities traded on a stock exchange like a single stock.
An exchange-traded fund (ETF) is an investment fund that holds a basket of securities (stocks, bonds, commodities) and trades on an exchange like a regular stock. ETFs track indexes (like the S&P 500), specific sectors, regions, or asset classes. Key advantages over mutual funds: lower expense ratios (often 0.05% or less), tax efficiency, no minimum investment, transparency (holdings disclosed daily), and ability to trade during market hours (unlike mutual funds, which settle at end-of-day). ETFs are passively managed (tracking an index) or actively managed (a manager picks holdings). For long-term investors, low-cost index ETFs are hard to beat; they offer instant diversification, minimal fees, and strong tax efficiency.