What is an ETF?

An ETF or an Exchange Traded Fund functions similarly to an index which help the investor spread their money out to reduce exposure and ultimately reduce their risk of running their investment down to $0 should things go wrong. The prices of an ETF are constantly changing and change very frequently, much like individual stocks do. ETFs will feature a lower expense ratio or cost when purchased.

The ETFs can also be directly bought by a consumer, unlike Mutual Funds which are only available through a brokerage and their prices are stagnant for the trading day. Also, mutual funds have to be bought directly from the company that is selling the shares.

This is a pretty basic comparison, but the best way to learn these types of things are to either use a trainer like the Investopedia Simulator or just pick an ETF or two and follow them for awhile and see how they work. Both of those options are free.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s