Understanding Exchange-Traded Funds (ETFs)
Definition and Characteristics
An exchange-traded fund (ETF) is a pooled investment security that resembles an individual stock in terms of its trading mechanism. Similar to mutual funds, ETFs comprise a basket of underlying assets that track a specific benchmark, such as an index, commodity, sector, or group of stocks.
Key Features
- Traded on stock exchanges like stocks
- Offer diversification and exposure to specific markets or assets
- Provide intraday liquidity and real-time pricing
- Typically have lower fees than other investment funds
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