4-minute Money Ideas

An Exchange Traded Fund (ETF) is a security that owns a basket of assets (like stocks or bonds), the ownership of which is divided into shares. It is often compared with a “mutual fund,” as a mutual fund is also a basket of assets. One of the main differences between the two, however, is that an ETF trades on an exchange (like the New York Stock Exchange) throughout the trading day. A regular (or “open end”) mutual fund, on the other hand, normally only trades once a day. All the investors in a mutual fund will get the same price when the fund trades at the end of the day. Why do people invest in ETFs? Since the ETF encompasses many different assets divided into shares, it has built-in diversification. There are different types of ETFs specializing in different sectors, so you can choose the type of ETF that suits you. As ETFs are a marketable investment, they can be traded throughout the day. ETFs tend to cost less than mutual funds because they aren’t actively managed, and so their fees are lower. What yo