An Exchange-Traded Fund is a fund traded on an exchange: it offers the flexibility and the liquidity of an individual stock, and gives a simple acces to a diversified investment. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day. They can also be sold short and bought on margin. Most ETFs track an underlying index.

Most ETFs charge lower annual expenses than mutual funds. However, as with stocks, one must pay a commission to buy and sell ETF shares.