Exchange Traded Fund (ETF)
An exchange-traded fund (ETF) is a type of investment vehicle that tracks the performance of a particular asset or group of assets, such as stocks, bonds, or commodities. ETFs are traded on stock exchanges, just like individual stocks, and can be bought and sold throughout the trading day.
One of the main benefits of ETFs is that they offer diversification in a single investment. By holding a single ETF, an investor can gain exposure to a wide range of assets, which can help to mitigate risk. ETFs also tend to have lower fees than other types of mutual funds, making them an attractive option for investors looking to minimise expenses.
There are many different types of ETFs available, each with a different focus. Some ETFs track a specific market index, such as the S&P 500, while others are actively managed and seek to outperform a particular benchmark. ETFs can be a useful tool for investors looking to build a diversified portfolio or to gain exposure to specific asset classes or market sectors.
It is important for investors to carefully consider the specific holdings and investment objective of an ETF before deciding to invest in it. As with any investment, ETFs carry risk and it is important to understand the risks involved before making an investment decision.