QUESTION:
I’m fairly new to investing and am thinking of branching out from mutual funds. What can you tell me about exchange-traded funds?
ANSWER:
Simply put, an exchange-traded fund (EFT) is a basket or bundle of individual securities that track an index, sector, commodity, or other assets. Unlike their “cousin” mutual funds, EFTs are marketed on a stock exchange like stocks. They may contain a single investment type or be a mixture, including stocks, commodities, bonds, or currency. Some ETFs offer U.S.- only holdings, while other may include international securities. ETFs have low expense ratios and are generally less costly than buying the stocks individually.