ETF
Quick definition: An ETF, or exchange-traded fund, is a fund that holds a basket of investments and trades on a stock exchange like a single share.
In plain English
Instead of buying many stocks one by one, you buy one share of an ETF that holds them all. Most ETFs track an index, such as the S&P 500, but some hold bonds, gold or other assets.
Example
One share of an S&P 500 ETF gives you a small slice of roughly 500 large US companies. When those companies pay dividends, the fund collects them and normally passes them on to you.
Why it matters
ETFs make diversification easy and usually cost little. Some pay distributions every quarter, and some pay monthly.
Common mistakes
- Assuming all ETFs are low-risk. A fund is only as safe as what it holds.
- Ignoring costs. Check the expense ratio.
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estimates and may not reflect real-world investment results.
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decisions and any outcomes resulting from them.
Past performance and projected returns do not guarantee future results.
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