ETF (Exchange-Traded Fund)

What is ETF (Exchange-Traded Fund)? — Definition

An ETF (Exchange-Traded Fund) is a pooled investment vehicle that holds a collection of underlying assets and trades on a stock exchange throughout the day, just like individual stocks. Unlike mutual funds, which price once daily after market close, ETFs can be bought or sold at any moment during trading hours at market price.

ETFs track an index (like the S&P 500), a sector (like technology or energy), a commodity (like gold), or a strategy (like dividend growth or minimum volatility). The expense ratios of major ETFs are extremely low — SPY (S&P 500 ETF) charges just 0.09% annually, meaning $9 per $10,000 invested per year.

Example

The Invesco QQQ Trust (QQQ) tracks the Nasdaq-100. From January 2013 to January 2023, it delivered a CAGR of approximately 18% — turning $10,000 into over $53,000. By contrast, the average actively managed fund underperformed the index after fees.

ETF holdings are searchable in BMInsider's Smart Money Tracker — some institutional investors use ETFs as part of their disclosed 13F holdings, offering clues to their sector allocation strategies.