What Is an ETF?

An exchange-traded fund (ETF) is a form of securities that follows an index, sector, commodity, or other asset and may be bought and sold on a stock market like any other stock. An ETF may be set up to track anything from a single commodity’s price to a vast and varied group of assets. ETFs can even be built to follow certain investing strategies.
The SPDR S&P 500 ETF (SPY), which tracks the S& P 500 Index, is a well-known example. ETFs can hold a variety of investments, such as stocks, commodities, bonds, or a combination of them. An exchange-traded fund is marketable security, which means it has a price that can be purchased and sold easily.
ETFs can hold a variety of assets, including equities, commodities, and bonds; some are limited to holdings in the United States, while others are global.

Exchange-traded funds are one of the most important and valuable products created for individual investors in recent years. ETFs offer many benefits and, if used wisely, are an excellent vehicle to achieve an investor’s investment goals.

Briefly, an ETF is a basket of securities that you can buy or sell through a brokerage firm on a stock exchange. ETFs are offered on virtually every conceivable asset class from traditional investments to so-called alternative assets like commodities or currencies. In addition, innovative ETF structures allow investors to short markets, to gain leverage, and to avoid short-term capital gains taxes.