Exchange-Traded Fund (ETF)
An ETF is a fund that tracks an index, sector or asset class and trades on a stock exchange like a share.
Unlike unit trusts or OEICs, ETFs trade continuously throughout the day at market prices. Most major ETFs passively track an index (S&P 500, FTSE 100) with very low annual charges — often below 0.1% per year.
ETFs have largely replaced traditional index tracker funds for cost-conscious investors because they combine the diversification of a fund with the real-time tradability of a stock. The spread between bid and ask is the main additional cost.
Synthetic ETFs use derivatives to replicate index performance rather than holding the underlying shares — they carry counterparty risk that physical ETFs avoid.
Further Reading
Jack Bogle's case for low-cost index funds, in under 300 pages.
Check Price →Keep budgets, portfolios and goals in one place with a dedicated finance planner.
Check Price →Roger Lowenstein's definitive biography of the world's most famous investor.
Check Price →Related terms
Recommended Reading & Tools
As an Amazon Associate we earn from qualifying purchases. Links below are affiliate links.
Jack Bogle's case for low-cost index funds, in under 300 pages.
Check Price →Tidy statements, reports and research with a simple desk filing organizer.
Check Price →Robert Kiyosaki's bestseller on assets, liabilities and financial literacy.
Check Price →