Exchange-Traded Fund (ETF)

Definition

An investment fund whose shares trade on a stock exchange. An ETF may hold stocks, bonds, or other assets, and many aim to track an index.

An ETF can hold a basket of investments, so one trade can provide exposure to many assets. ETF shares trade throughout the market day, and their prices can move as the holdings change in value. The fund’s holdings and fees help determine how closely it follows its stated objective.

Example

You buy one share of an ETF that tracks a broad stock index. That share gives you exposure to the stocks the fund holds.