exchange traded funds

An ETF is similar to a stock in that it trades on a stock exchange during the day.  It is also similar to a mutual fund in that it represents a basket of securities.  It combines many of the best qualities of a stock and best qualities of a mutual fund.

In a stock mutual fund, investors pool their money into a fund, and the fund manager invests those funds.  When an investor decides to sell his investment, the fund manager sells stocks in order to return money to the investor.  In an ETF, when you invest your money, you are buying a security that represents a basket of stocks.  When you want to sell, you simply sell the security on the stock exchange.