What is an ETF?
An ETF is an exchange-traded fund: a basket of assets that trades on an exchange like a stock.
The short version
An ETF holds a basket of stocks, bonds, commodities, crypto exposure, or other assets and trades during the day like a stock. Investors use ETFs for diversified exposure, sector bets, hedging, or low-cost indexing.
How it works
ETF shares trade between investors on exchanges. Behind the scenes, authorized participants can create or redeem large blocks of shares to help keep the ETF price close to the value of its holdings.
Why people use ETFs
ETFs can make diversification simple, reduce single-stock risk, offer transparent holdings, and provide easy access to themes or asset classes that would be harder to buy directly.
Main risks
ETF risk depends on what it owns. A broad index ETF has different risk than a leveraged ETF, bond ETF, sector ETF, or crypto ETF. Tracking error, liquidity, fees, and tax structure can also matter.
What to check
Look at holdings, expense ratio, liquidity, spread, issuer, tracking history, leverage, derivatives use, and whether the ETF physically holds assets or uses swaps or futures.