Glossary
Exchange-Traded Fund (ETF)
A basket of securities that trades on an exchange like a single stock.
ETFs hold an underlying portfolio of equities, bonds, commodities, or derivatives and issue shares that trade intraday at market prices. Prices stay close to net asset value thanks to an arbitrage mechanism between authorised participants and the fund itself.
Three flavours dominate: passive index trackers (SPY, QQQ), thematic or sector ETFs (XLK for tech, XLE for energy), and actively managed ETFs (ARKK).
Versus mutual funds, ETFs offer lower expense ratios, intraday liquidity, and in-kind creation/redemption that reduces capital-gains distributions. Versus direct stock ownership, they deliver instant diversification with one trade.