What is an ETF and what are the differences between them and mutual funds

Exchange Traded Fund
Exchange Traded Fund

ETF is an Exchange Traded Fund. There are over 2000 ETF in the US alone, covering multiple sectors, asset classes and investment options.

Just like a mutual fund, the ETF is a diversified holding entity with a basket of assets based on their goal.

Like a mutual fund, an investor buys shares in an ETF to own a proportional interest in the pooled assets.

Unlike mutual funds, ETF shares are traded in continuous markets on global stock exchanges, can be bought and sold through brokerage accounts, and have continuous pricing and liquidity throughout the trading day.

Thus, they can be margined, lent, shorted, or subjected to any other strategy used by sophisticated equity investors.

Most ETFs are, in their investment processes and organization, simply an extension of index-based mutual funds. They are a new delivery vehicle that happens to be more tax efficient, have lower cost than index funds, and be available on an exchange.