What does ETF mean?

An ETF (Exchange-Traded Fund) is a basket of stocks you can buy as a single ticker — SPY, for example, tracks the S&P 500's roughly 500 companies in one purchase.

An ETF (Exchange-Traded Fund) is a basket of stocks you can buy as a single ticker. SPY tracks the S&P 500 — one purchase gives you a slice of 500 companies. ETFs are popular for low-cost, instant diversification.

ETF example

One share of an S&P 500 ETF at around $500 gives you a small slice of all 500 companies in the index. With a 0.03% expense ratio, you pay about $3 a year for every $10,000 invested.

Common beginner mistake

Assuming every ETF is diversified and low-risk. Single-sector, thematic and leveraged ETFs can swing as hard as any single stock.