What are exchange-traded funds (ETFs)?

Exchange-traded funds (ETFs) are investment funds that are traded on stock exchanges, much like individual stocks. This means that during trading hours, investors can buy and sell shares of an ETF at market prices that fluctuate throughout the day, similar to how they would trade stocks.

ETFs typically track a specific index, commodity, or a basket of assets, providing investors with exposure to a broad array of markets or sectors without having to buy each individual security. One of the key advantages of ETFs is their liquidity and flexibility, allowing for real-time trading and the ability to take advantage of price movements throughout the trading day.

Understanding the nature of ETFs is crucial, as they offer a unique entry point into investing that combines characteristics of both stocks and mutual funds, providing diverse investment options with typically lower fees.