What is an ETF?

Article author
Jennifer
  • Updated

 

An ETF (or exchange-traded fund) is a group of investments that are often designed to mirror the performance of an index, such as the S&P 500-stock index. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs can be attractive as investments because of their low costs, tax efficiency, and stock-like features.

 

You can’t invest directly in an index, so ETFs provide a way to benefit from an index’s returns. Acorns portfolios contain a mix of seven ETFs, providing broad exposure to thousands of stocks and bonds. This creates diversification, which can help protect against market swings. When some investments are down, others may be up.

 

For more about ETFs, see this Grow article.

 

For more about diversification, see this Grow article.

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