Glossary
Exchange-Traded Fund (ETF)
A basket of securities that trades on an exchange like a single stock.
ETFs hold an underlying portfolio (equities, bonds, commodities, derivatives) and issue shares that trade intraday at market prices. Prices stay close to net asset value (NAV) thanks to an arbitrage mechanism between authorised participants and the fund.
Three flavours: passive index trackers (SPY, QQQ), thematic / sector ETFs (XLK for tech, XLE for energy), and actively managed ETFs (ARKK).
Compared to mutual funds: lower expense ratios, intraday liquidity, in-kind creation/redemption that reduces capital-gains distributions. Compared to direct stock ownership: instant diversification.