Exchange-traded fund (ETF)
A fund that holds a basket of assets and trades on an exchange like a stock, typically tracking an index, sector or commodity.
An exchange-traded fund is a pooled investment that trades on an exchange throughout the day, like a stock. Most ETFs track an index, a sector, a commodity or a currency. Authorized participants create and redeem shares in large blocks, which keeps the market price close to the value of the holdings.
On our site, ETF pages show the holdings, the expense ratio and flows where available. The market price can briefly differ from net asset value, especially in volatile markets.
Traders care because ETFs are a liquid way to trade sectors and markets, and their flows can move the underlying assets. Premiums and discounts to net asset value matter for entry and exit.
Worked example (illustrative numbers, not real data): an ETF holds assets worth 50 dollars per share, and its market price is 50.25. It trades at a 0.5 percent premium to net asset value. Buying at that price means paying 0.25 more than the holdings are worth at that moment.