Exchange-Traded Funds (“ETFs”) are one of the most popular investment products today. Investors throughout the world have adopted ETFs for their many benefits such as quick diversification, low costs, and easy trading. As their name suggests, ETFs have two defining characteristics: they are funds, and they trade on an exchange, sounds simple, right? Here’s a quick guide to help you get to know ETFs even better. Now, mutual funds used to be the most commonly bought fund product – this would be what your parents or even grandparents would have invested in - but ETFs are rapidly replacing mutual funds in many personal and professional investment portfolios as they are typically cheaper than mutual funds, can be traded at any time that the exchange is open (unlike mutual funds that only traded once a day) and often have lower minimum investment levels meaning smaller investors can participate in the markets.

As ETFs contain multiple securities, they are also good for investors who don’t want to put all their eggs in one basket, and because ETFs trade on stock exchanges they can be bought and sold as easily as a share. Read more about diversification here.

What is an exchange-traded fund? ETFs are a specific type of fund that are listed and traded on exchanges. This characteristic has many benefits for investors and makes buying and selling shares of ETFs easier and faster than traditional funds.

What is an exchange? An exchange is a marketplace where investors can buy and sell company shares or other financial instruments, like ETFs. Famous examples of exchanges include the New York Stock Exchange (NYSE) and Nasdaq in the US, the London Stock Exchange (LSE) and Euronext in Europe or the Tokyo Stock Exchange in Asia. Read more about exchanges.