ETFS & FUNDS
An ETF holds many investments in a single fund.- It trades throughout the day at market prices.
- Many ETFs track an index, like the S&P 500.
- Costs are shown as an expense ratio.
An exchange-traded fund (ETF) is a basket of investments, such as stocks or bonds, that trades on an exchange like a single stock. Buy one share of an ETF and you own a small slice of everything it holds.
How ETFs work
Most ETFs track an index: a list of companies chosen by a set of rules. An S&P 500 ETF, for example, holds the roughly 500 large US companies in that index. When those companies’ prices move, the ETF’s price moves with them.
ETFs vs. mutual funds
Both pool money from many investors. The main differences are how they trade and what they cost. ETFs trade throughout the day like stocks, while mutual funds are priced once a day after the market closes. ETFs often have lower minimums, and index ETFs tend to have lower fees.
What ETFs cost
Every ETF charges an expense ratio, a yearly fee taken from the fund’s assets. A 0.03% expense ratio works out to $3 a year for every $10,000 invested. You may also pay a small bid–ask spread when you buy or sell.
Risks to know
An ETF is only as diversified as what it holds. A broad index fund spreads risk across many companies, while a sector or single-country ETF concentrates it. ETF prices can fall, and you could get back less than you invest.
Getting started
On Vantar, you can buy ETFs in dollars or in shares on Trade, and set up a recurring investment if you want to make it a habit.
Start with a stock or an ETF
Buy in dollars or shares on Trade. Open your account on the web.
Open your accountFractional shares are subject to availability. ETFs are subject to market risk, and you could lose money. This article is for educational purposes only and is not investment advice. Read a fund’s prospectus before investing.
