Exchange-traded fund

An exchange-traded fund (ETF) is an investment fund whose shares trade on a stock exchange. It can hold a portfolio of assets and often tracks an index.

Net asset value: The per-share value of a fund’s assets minus its liabilities. ETF market prices are compared with this value to assess premiums and discounts.
Index fund: An investment fund designed to follow the performance of a market index. Many ETFs are index funds, though ETF describes a trading structure rather than an investment strategy.
Equity ETF: An exchange-traded fund that invests primarily in stocks. Equity ETFs provide exchange-traded access to companies, markets, or stock indexes.
Exchange-traded note: An unsecured debt security traded on an exchange whose return is linked to an index or asset. Unlike an ETF, an ETN is debt issued by a financial institution, creating issuer credit risk.
Passive investing: An investment approach that seeks market returns by tracking benchmarks rather than selecting securities to outperform them. Low-cost index ETFs have made passive strategies widely accessible.
Authorized participant: A financial institution that can create or redeem ETF shares directly with the fund. Authorized participants help align ETF share supply with investor demand.
Mutual fund: An investment fund that pools money from investors and generally issues or redeems shares at end-of-day value. Its end-of-day dealing contrasts with the intraday trading of ETF shares.
Bond ETF: An exchange-traded fund that invests primarily in bonds. Bond ETFs package fixed-income holdings in shares that trade throughout the day.
Closed-end fund: An investment company that issues a fixed number of shares, which trade on an exchange. Both trade intraday, but closed-end funds generally lack the ETF’s routine creation-and-redemption mechanism.
Securities lending: The temporary lending of securities to borrowers, usually in exchange for collateral and a fee. Some ETFs lend portfolio holdings to generate revenue, adding operational and counterparty considerations.

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