ETF (Exchange-Traded Fund)
A fund that holds a basket of assets (stocks, bonds, or commodities) and trades on a stock exchange like an individual stock.
ETFs combine the diversification of mutual funds with the flexibility of stock trading. They typically track an index (like the S&P 500), a sector (technology, healthcare), or an asset class (bonds, real estate). Because most ETFs are passively managed, they have lower fees than actively managed mutual funds — expense ratios of 0.03%–0.20% are common. ETFs are ideal for long-term investors who want broad market exposure without picking individual stocks. You can buy or sell ETF shares any time the market is open, and many brokers now offer commission-free ETF trading.
Example
A single share of a total world stock ETF (like VWCE) for ~$110 gives you exposure to over 3,700 companies across 47 countries.
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Related terms
Diversification
The practice of spreading investments across different assets, sectors, and geographies to reduce the impact of any single investment's poor performance.
Asset Allocation
The strategy of dividing investments among different asset classes — stocks, bonds, real estate, cash — to balance risk and return according to your goals and risk tolerance.
Dollar-Cost Averaging (DCA)
An investment strategy of regularly investing a fixed amount regardless of market price, reducing the impact of volatility over time.
Dividend Yield
The annual dividend payment of a stock or fund expressed as a percentage of its current price.