An exchange-traded fund is a basket of securities you can buy and sell like a single stock. Each share represents fractional ownership of everything inside the fund.
Unlike a mutual fund, you trade an ETF on an exchange during market hours. Prices update continuously; mutual funds settle once per day.
The fund's expense ratio is the annual cost — expressed as a percentage of assets — that pays for management, operations, and licensing. Low is good. Below 0.1% is excellent for index ETFs.
Most ETFs follow an index (passive). Some pick securities actively. Passive funds tend to cost less and beat most active funds over long horizons.
When you buy an ETF you get instant diversification across whatever the fund holds — hundreds or thousands of securities, often across countries and sectors.