ETF

An exchange traded fund (ETF) is a basket of securities usually designed to track the movements of an index such as the FTSE 100. This is done either by holding the underlying stock or using derivatives to achieve the same returns. ETFs are traded on stock exchanges and their price therefore fluctuates depending on levels of supply and demand. Like shares, they can be shorted or held as a diversifier within an investment portfolio. ETFs are bought through a broker who will charge a commission but in general they have very low fees as they are not actively managed by an investment professional.

This definition is for general information purposes only