ETF (Exchange-Traded Fund)

An ETF pools money from many investors to hold a portfolio of assets — most often the stocks in a particular index — and its shares trade on an exchange throughout the day at market prices.

That intraday trading is the main structural difference from a traditional mutual fund, which prices once daily after the close. ETFs also generally require no minimum investment beyond the price of one share.

Most ETFs are passively managed index trackers with very low expense ratios, and their structure tends to generate fewer taxable capital gains distributions than comparable mutual funds — a real advantage in a taxable account.

A single broad-market ETF gives you thousands of companies in one holding, which is why it has become the default building block for straightforward, diversified portfolios.