What is an Exchange-Traded Fund (ETF)?

Exchange-Traded Fund (ETF) is a fund that is basically a basket of investments, like a mutual fund, that tracks an index, which can be broad like the S&P 500 or narrow like the Japanese Yen index. Unlike a mutual fund, an ETF can be traded like a stock on an exchange. The prices of ETFs will fluctuate throughout the day and an investor has to buy and sell them through a broker, which normally means paying a commission per trade. However, ETFs tend to have lower overall costs associated with them, because they are not usually actively managed, and are more tax-efficient than mutual funds. ETFs were designed to offer investors an easy and cheap way to invest in a particular sector of the market. 


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