An Exchange-Traded Fund (ETF) is an investment fund that holds a collection of assets — such as stocks, bonds, or commodities — and trades on a stock exchange just like an individual stock. ETFs combine the diversification benefits of mutual funds with the flexibility of stock trading.
One major advantage of ETFs is their low cost. Because most ETFs passively track an index (like the S&P 500), they typically have lower management fees than actively managed mutual funds. For example, an S&P 500 ETF gives you exposure to 500 of the largest US companies in a single purchase.
ETFs are highly liquid, meaning you can buy and sell them throughout the trading day at market prices. They are an excellent choice for both beginner and experienced investors looking for diversified, cost-effective investment options. Popular ETF categories include stock ETFs, bond ETFs, sector ETFs, and international ETFs.