What are ETFs?

ETFs (exchange traded funds) are securities that trade like stocks but that invest in a basket of securities (usually stocks and bonds) in order achieve certain investment goals, such as following the performance of a stock index or a commodity price.

Because a basket of securities can be held by a single ETF, they are often used by investors to simplify portfolio diversification. For example, a balanced portfolio ETF would hold a portfolio of different stocks and bonds, but an investor would only need to purchase shares of the ETF itself in order to take advantage of the portfolio diversification that it offers.

Also, since they tend to have lower management fees than mutual funds, ETFs have become very popular among buy-and-hold investors who don’t see the point in paying higher fees in order to achieve a simple investment goal like passively tracking an index.

ETFs are eligible to be held in registered accounts.