An ETF (Exchange-Traded Fund) is an investment fund that trades on stock exchanges like individual stocks. ETFs hold a basket of assets such as stocks, bonds, or commodities, and typically track an index. They offer diversification, lower expense ratios than mutual funds, and can be bought or sold throughout the trading day at market prices.

ETFs work by pooling investor money to purchase a collection of securities that mirror an index or investment strategy. When you buy ETF shares, you own a portion of the underlying assets. ETF prices fluctuate throughout the trading day based on supply and demand, and authorized participants help keep prices aligned with the fund's net asset value (NAV).

Do ETFs pay dividends?

Many ETFs pay dividends, distributing income from their underlying holdings to shareholders. Dividend frequency varies by fund—some pay monthly, quarterly, or annually. Dividend yields depend on the ETF's holdings; equity ETFs typically yield 1-4%, while bond ETFs and dividend-focused funds may yield higher.

Are ETFs cheaper than mutual funds?

ETFs are generally cheaper than mutual funds. The average ETF expense ratio is around 0.20%, while actively managed mutual funds average 0.50-1.00%. Index ETFs can have expense ratios as low as 0.03%. Lower fees directly translate to higher returns for investors over time, making ETFs cost-effective for long-term investing.

What is tracking error in ETFs?

Tracking error measures how closely an ETF follows its benchmark index. It's the standard deviation of the difference between the ETF's returns and the index returns. Lower tracking error (under 0.50%) indicates the ETF accurately mirrors its benchmark. Tracking error can result from fees, sampling methods, or timing differences in rebalancing.

How do I start investing in ETFs?

To start investing in ETFs: 1) Open a brokerage account with a platform that offers ETF trading. 2) Research ETFs using screeners to find funds matching your investment goals. 3) Compare expense ratios, holdings, and performance. 4) Place a buy order for your chosen ETF shares. 5) Monitor your investment and rebalance periodically as needed.

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Q: What is an expense ratio?

An expense ratio is the annual fee that ETFs charge shareholders, expressed as a percentage of assets. It covers fund management, administration, and operational costs. For example, a 0.10% expense ratio means you pay $10 annually for every $10,000 invested. Lower expense ratios directly increase your net returns over time.

Research and compare 4,500+ exchange-traded funds with comprehensive data including holdings, expense ratios, dividends, and performance. Browse by issuer, asset class, or use our screener to find low-cost index funds and build diversified portfolios.

ETFs are the foundation of passive investing strategies, offering tax-efficient exposure to stocks, bonds, and commodities. Compare ETFs by expense ratio, holdings, and performance to make informed investment decisions.

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Key ETF Analysis Terms & Definitions

What is an ETF?

An ETF (Exchange-Traded Fund) is an investment fund that trades on stock exchanges like individual stocks. ETFs hold a basket of assets such as stocks, bonds, or commodities, typically tracking an index. They offer diversification, lower expense ratios than mutual funds, and real-time pricing throughout the trading day.

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What is an expense ratio?

An expense ratio is the annual fee ETFs charge shareholders as a percentage of assets. It covers fund management, administration, and operational costs. A 0.10% expense ratio means you pay $10 annually for every $10,000 invested. Lower expense ratios directly increase your net returns.

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What is Assets Under Management (AUM)?

Assets Under Management (AUM) is the total market value of all securities held by an ETF. Larger AUM typically indicates greater investor confidence, better liquidity, and tighter bid-ask spreads. ETFs with higher AUM generally have lower trading costs for investors.

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What are ETF holdings?

ETF holdings are the individual securities (stocks, bonds, etc.) owned by the fund. Holdings are weighted by percentage, with top holdings having the most impact on fund performance. Reviewing holdings helps understand diversification level and sector exposure.

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What is the difference between ETFs and mutual funds?

ETFs trade on exchanges throughout the day at market prices, while mutual funds trade once daily at NAV. ETFs typically have lower expense ratios, no minimum investment requirements, and greater tax efficiency. Mutual funds may offer automatic investment plans with certain brokers.

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What is ETF dividend yield?

ETF dividend yield is the annual dividend payment divided by the fund's current price, expressed as a percentage. Many ETFs distribute dividends from their underlying holdings monthly, quarterly, or annually. Equity ETFs typically yield 1-4%, while bond and dividend-focused ETFs may yield higher.

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