An Exchange-Traded Fund is a basket of securities that trades on a stock exchange just like a regular stock. ETFs can hold stocks, bonds, commodities, or a mix. They provide instant diversification — owning one share of a broad-market ETF gives you exposure to hundreds or thousands of companies.
ETFs have expense ratios (annual management fees), but for major index-tracking ETFs these are extremely low — often less than 0.1% per year. This cost efficiency is one of the main reasons passive investing through ETFs has become enormously popular.
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