Glossary
ETF (Exchange Traded Fund)
An ETF (Exchange Traded Fund) is an exchange-traded fund that usually tracks an index, such as an equity or bond index. Through a single unit, an investor gains access to an entire basket of securities and thus broad diversification. ETFs are traded continuously on an exchange like shares and are generally low-cost. The value of an ETF fluctuates with the underlying market.
At a glance
- An ETF usually tracks an index and bundles many securities into a single unit.
- ETFs are traded continuously on an exchange and generally have low ongoing costs.
- The value fluctuates with the tracked market; broad diversification does not eliminate market risk.
Frequently asked questions
An ETF is traded continuously on an exchange and usually tracks an index passively, often at low cost. A classic investment fund is typically settled once a day at net asset value and may be actively managed. Both bundle many securities into one product, but differ in how they are traded and managed.
No. Broad diversification can reduce the risk of individual securities, but general market risk remains. If the tracked market falls, the value of the ETF falls too.
