An exchange-traded fund (ETF) combines features of mutual funds and stocks, offering the best of both worlds.
It lets you enjoy the diversification benefits of mutual funds (MFs) and the liquidity of a stock.
Put simply, you can buy and sell an ETF like a stock. It is a collection of several investments, such as stocks, bonds, and commodities, which can be traded with ease.
ETFs have a lower expense ratio as compared to other funds because they are passively managed, which brings down the administrative costs.
An ETF can be traded throughout the day like stocks. Different types of ETFs are available for different needs, such as Index ETFs, Leveraged ETFs, Currency ETFs, etc.