Exchange-traded fund (ETF)
Principles of Finance glossary · Principles Of Finance
Definition
A pooled investment vehicle whose shares trade on an exchange like a stock.
Exchange-traded fund (ETF) in plain English
An ETF is like a ready-made basket of many investments that you can buy or sell in a single click, all day long, just like one stock. Instead of researching and buying 500 different companies yourself, you buy one share of an ETF and instantly own a tiny slice of all of them. The "pooled" part means lots of people's money is combined to buy that basket, and "trades on an exchange" means its price moves throughout the day as people buy and sell — unlike older mutual funds that only price once a day. It's a popular way to spread your money around cheaply and easily.
Also called: ETF
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