What is an exchange-traded fund (ETF)?

What is an exchange-traded fund (ETF)?

• A. A fund that holds a collection of assets and trades on an exchange like a stock
• B. A fixed-income investment option
• C. A retirement savings account
• D. A type of insurance product

Answer: (A)

An exchange-traded fund (ETF) is defined as a fund that holds a collection of assets and trades on an exchange like a stock. This means that ETFs typically contain a diverse portfolio of securities, which can include stocks, bonds, commodities, or a mix of these assets. The key feature of an ETF is that it can be bought and sold throughout the trading day on a stock exchange, similar to individual stocks. This provides investors with flexibility and liquidity, as they can enter and exit positions at market prices during trading hours. Additionally, because ETFs can track indices, sectors, or specific asset classes, they allow investors to easily diversify their portfolios. This diversification helps to spread risk while still exposing investors to potential growth in those underlying assets. The ability to trade ETFs throughout the day makes them particularly attractive to investors who seek more active management of their portfolios compared to traditional mutual funds, which only trade at the end of the trading day. The other options provided do not accurately capture the nature of an ETF. For instance, fixed-income investment options refer specifically to investments in fixed-interest securities such as bonds, and while some ETFs may focus on fixed-income securities, this does not define what an ETF is overall. Similarly, a retirement savings account is a specific

An exchange-traded fund (ETF) is defined as a fund that holds a collection of assets and trades on an exchange like a stock. This means that ETFs typically contain a diverse portfolio of securities, which can include stocks, bonds, commodities, or a mix of these assets. The key feature of an ETF is that it can be bought and sold throughout the trading day on a stock exchange, similar to individual stocks. This provides investors with flexibility and liquidity, as they can enter and exit positions at market prices during trading hours.

Additionally, because ETFs can track indices, sectors, or specific asset classes, they allow investors to easily diversify their portfolios. This diversification helps to spread risk while still exposing investors to potential growth in those underlying assets. The ability to trade ETFs throughout the day makes them particularly attractive to investors who seek more active management of their portfolios compared to traditional mutual funds, which only trade at the end of the trading day.

The other options provided do not accurately capture the nature of an ETF. For instance, fixed-income investment options refer specifically to investments in fixed-interest securities such as bonds, and while some ETFs may focus on fixed-income securities, this does not define what an ETF is overall. Similarly, a retirement savings account is a specific