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Exchange-traded fund (ETF)

An ETF is a pooled investment fund whose shares trade on a stock exchange at market prices.

By Betta Signals Research Desk · Reviewed October 24, 2026

Plain-English definition: An ETF is a pooled investment fund whose shares trade on a stock exchange at market prices.[1]

How the term is used

An ETF's market price may be above or below its net asset value during the day. Investors also face trading costs such as bid-ask spreads in addition to the fund's operating expenses.[1]

What to check before relying on it

The ETF label does not make products interchangeable. Leveraged, inverse, active, bond, commodity, options-based, and crypto-linked products require different checks.

Example

Two S&P 500 ETFs may hold similar portfolios but differ in fee, spread, tax structure, securities lending, and tracking difference.

Net asset value (NAV)Expense ratioIndex

Research last reviewed: October 24, 2026. This definition is educational and does not evaluate a particular security.

Sources

  1. Investor.gov: Characteristics of Mutual Funds and ETFs — how mutual funds and ETFs issue shares, trade, calculate NAV, and charge expenses. Accessed October 24, 2026.