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Stock etf

Stock ETF

A Stock Exchange-Traded Fund (ETF) is a type of investment fund that holds a diversified portfolio of stocks and is traded on stock exchanges like a regular stock. Stock ETFs allow investors to gain exposure to a broad range of equities or specific sectors with a single purchase. They offer the diversification benefits of mutual funds but are more liquid, as they can be bought and sold throughout the trading day at market prices.

Example

An investor buys shares in an S&P 500 ETF, which tracks the performance of the 500 largest U.S. companies, providing exposure to a broad section of the stock market.

Key points

• A type of investment fund that holds a portfolio of stocks.

• Traded on stock exchanges like individual stocks.

• Provides diversification and liquidity.

Quick Answers to Curious Questions

How do stock ETFs provide diversification for investors?

They hold a basket of different stocks, allowing investors to spread their risk across multiple companies or sectors with a single purchase.

What are the advantages of investing in stock ETFs compared to individual stocks?

ETFs offer instant diversification, lower fees, and can be traded throughout the day, unlike mutual funds, which trade only at the end of the day.

How do stock ETFs differ from mutual funds in terms of trading?

ETFs can be traded like stocks throughout the trading day, while mutual funds are traded once daily after market close.

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