Exchange-Traded Fund (ETF)

Definition

An Exchange-Traded Fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index. ETFs are listed on exchanges and trade throughout the day just like ordinary stock. They often have lower expense ratios than mutual funds.

Example

The SPDR S&P 500 ETF (ticker: SPY) is one of the most popular ETFs. It holds stocks of the 500 largest U.S. companies, allowing you to invest in the entire S&P 500 index with a single purchase.