An ETF is an exchange-traded fund. Depending on which ETF you invest in, the fund could be made up of any number of assets, from bonds to commodities to stocks. When you buy shares of an ETF you are buying a portion of the included assets. If the value of the assets goes up, your share value goes up but if the value of the assets goes down, your share value goes down – just like if you were purchasing shares of a stock on the stock exchange. ETFs have become extremely popular for individual investors lately, and for good reason. ETFs give investors who don’t have a lot of money access to a highly diversified and low-cost investment option. You can also buy and sell ETFs whenever. This last point is what truly differentiates an ETF from a mutual fund. While similar, a mutual fund does not trade like stocks on a stock exchange. If you’re new to investing, ETFs can be a great option, especially if you only have a modest investment to get started. As always, check in with a financial advisor to learn more.
