What Is an ETF?

An exchange-traded fund, usually called an ETF, is an investment fund that trades on a stock exchange. It can hold shares, bonds, commodities or other assets, depending on what the fund is designed to track.

Many ETFs are built to follow an index, such as a global equity index, a regional stock market index or a bond market index. Instead of trying to pick individual companies, the ETF gives investors exposure to a broad basket of assets through a single listed product.

For self-directed investors, ETFs can be useful because they are generally transparent, diversified and relatively low cost compared with many traditional fund structures. However, they still carry investment risk. The value of an ETF can rise or fall, and investors can lose money.

ETF Compass does not recommend any specific ETF. The purpose of this site is to help users understand the mechanics of investing assumptions, compounding, fees and long-term projections.