By Ziv Shay | Updated June 2026

ETF (Exchange-Traded Fund)

A basket of securities that trades on a stock exchange like a single stock, offering instant diversification at low cost.

An exchange-traded fund holds dozens or thousands of underlying assets — stocks, bonds, or commodities — but trades on an exchange throughout the day at market prices. Index ETFs that track benchmarks like the S&P 500 (e.g., VOO) have become the default building block for long-term investors thanks to rock-bottom expense ratios and broad diversification.

Example

Buying one share of VOO (~$500) gives you fractional ownership of all 500 companies in the S&P 500. Instead of researching and buying 500 stocks, you own the whole index in a single, liquid trade.

Try It Yourself

Put this concept to work with our free VOO vs VTI Comparison.

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Related Terms

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