A basket you can trade
An ETF is a fund that holds a basket of investments and trades on an exchange like a single stock. One share of an S&P 500 ETF gives you a slice of all 500 companies.
ETFs versus mutual funds
| ETF | Mutual fund | |
|---|---|---|
| Trading | Any time the market is open | Once a day at the closing price |
| Minimum | One share or less | Often $1,000 or more |
| Costs | Usually low | Varies, often higher |
| Taxes | Usually fewer capital gains payouts | More payouts |
Types of ETF
- Broad index: the whole market or a big index. See Index funds.
- Sector and theme: technology, healthcare, clean energy.
- Bond: Treasuries, corporate bonds.
- Leveraged and inverse: 2x or 3x daily moves, or the opposite. Very different risks: see Leveraged ETFs explained and Inverse ETFs.
What to check
- What it holds and how it chooses holdings.
- The expense ratio.
- Size and trading volume, so the spread is tight.
- Whether it is really an ETN. See ETF vs ETN.
See also
- Index funds What index funds are, why low-cost index investing beats most professional fund managers over time, and how to use index funds as a portfolio core.
- Expense ratios and fund fees What an expense ratio is, how fund fees are charged, how much a 1% fee costs over decades, and typical expense ratios for index and leveraged ETFs.
- Leveraged ETFs explained How leveraged ETFs like TQQQ and UPRO work, why they reset daily, how volatility decay erodes them, and what their historical drawdowns look like.
- ETF vs ETN The difference between exchange-traded funds and exchange-traded notes, why ETNs carry issuer credit risk, and what happens when an ETN is closed early.
Pages that link here: Building your investing knowledge, Investing FAQ
Last updated September 30, 2026. Education only, not investment advice.