An Exchange-Traded Fund (ETF) is a type of investment fund that holds a collection of assets, such as stocks, bonds, or commodities, and trades on stock exchanges like individual stocks. ETFs are managed by experts and offer diversification, potentially lower costs, and tax efficiency compared to some other investment options like mutual funds. ETFs can provide exposure to various markets, sectors, or investment themes.
Several financial institutions offer ETFs, including Vanguard and T. Rowe Price. Many ETFs are passively managed, meaning they track a specific market index or sector, while others are actively managed with the goal of outperforming benchmarks. The price of an ETF share varies depending on the underlying assets and market conditions, but there are generally no minimum purchase requirements beyond the cost of a single share. ETFs are widely available through brokerage accounts, making them accessible to a broad range of investors.
