Exchange-Traded Funds

What Is an Exchange-Traded Fund – ETF?

An exchange-traded fund is a collection of securities—such as stocks—that tracks an underlying index. The best known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index. ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types. An exchange-traded fund is a marketable security, so it has an associated price that allows it to be easily bought and sold.

Exchange-Traded Funds Explained

An ETF is called an exchange-traded fund since it’s traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close.