ETF (Exchange Traded Fund)
A pooled fund that trades on a stock exchange throughout the day like a regular stock.
ETFs hold a basket of securities (most often an index) and their shares trade on the NYSE or Nasdaq during market hours, not at end-of-day NAV. The largest U.S. ETFs include VOO (Vanguard S&P 500, 0.03%), VTI (Vanguard Total Stock Market, 0.03%), and QQQ (Invesco Nasdaq-100, 0.20%). ETFs are generally more tax-efficient than mutual funds because of the in-kind creation/redemption mechanism, which limits capital gains distributions. You pay a bid-ask spread on every trade, though most large ETFs trade at fractions of a penny.
Inside Finlo
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.