What are exchange-traded funds (ETFs)?

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  • A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. By owning an ETF, you get the diversification of a mutual fund but can purchase as little as one share. Another advantage is that the expense ratios (the price the issuing company charges annually to own the fund) for most ETFs are significantly lower than those of the average mutual fund.
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