What is an exchange-traded fund or ETF?

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An ETF is a fund that holds a variety of securities in one investment category or class that are generally passively managed. ETFs trade on an exchange, just like stocks, and therefore experience price changes throughout the day. Most ETFs are designed to track the performance of an index.

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Most ETFs are "passively managed." A passive investment attempts to replicate the performance of an entire asset class.

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ETFs and stocks and bonds

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ETFs can be used as the building blocks of your portfolio or as a complement to other investments you already own, providing further diversification. By providing low-cost, broad exposure to asset classes, they can help diversify your portfolio.   

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Broad stock ETFs and your investment portfolio

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Broad stock ETFs are diversified and can give you exposure to multiple financial sectors and individual securities and, in the case of international ETFs, a number of countries.