Exchange-Traded Funds (ETFs)
Investment funds traded on stock exchanges that track an index, commodity, or basket of assets.
ETFs trade on exchanges like shares while holding a diversified basket of assets. They offer broad exposure with low fees and intraday liquidity.
Exchange-traded funds are investment vehicles that trade on stock exchanges like individual shares but hold a diversified basket of assets such as stocks, bonds, commodities, or currencies. ETFs allow traders to gain broad market exposure without buying each underlying asset individually. They are popular for their low fees, transparency, and intraday liquidity.
How It Works
- An ETF provider creates a fund holding a specific basket of assets (e.g., S&P 500 stocks or gold)
- Shares are listed on exchanges and traded like any stock during market hours
- Authorised participants create and redeem ETF shares to keep the price aligned with underlying assets
- Currency ETFs track a single currency or basket against a benchmark
Trading Tips
Currency ETFs are a simple way to gain forex exposure through a stock brokerage account
Check the ETF's expense ratio, tracking error, and liquidity before trading
Avoid holding leveraged ETFs for more than a day, as daily rebalancing causes performance deviation over time
Related Terms
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