An exchange-traded fund is a type of investment fund, an instrument allowing to pool money from many investors and investing it in securities as specified in the fund prospectus, while benefiting from the advantages of group investment. ETFs are traded in a similar manner to stocks – on the stock exchange.
ETFs are an easy way for an investor to diversify their portfolio and are attractive to investors for a number of reasons. The stock-like features that they exhibit make them manageable, whether they are being used for asset allocation long-term investment purposes or a short-term market timed investment strategies. ETFs do not require active management, which has the advantage of making them relatively low cost. They also have typically low marketing costs and accounting expenses.