Roadmap · Level 7

ETFs

A single investment that holds many stocks at once, for instant diversification.

An ETF (Exchange-Traded Fund) is a basket of many different stocks (or bonds) bundled into a single investment you can buy with one purchase. For example, an S&P 500 ETF holds small pieces of all 500 companies in that index.

Picture it

One share of a stock

1 company

One share of an ETF

Dozens or hundreds of companies

Buying one stock is a bet on one company. One share of an ETF holds a small piece of many companies at once, so a single bad result matters less.

ETFs are popular because they offer instant diversification — instead of betting on one company's performance, you're spreading risk across many. They trade throughout the day just like individual stocks, and typically charge low fees compared to actively managed mutual funds.

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