An exchange traded fund,or ETF, is a cluster of different securities merged together in a single fund that is traded on the stock exchange. Most ETFs track a benchmark or an index and try to replicate its performance, making it easier for an investor to buy or sell their shares of an ETF through a broker. ETFs trade at the stock exchange much like the price of other stocks.
The objective of an ETF is to offer an array of investment strategies at low cost and is not limited to stocks. An investor can invest in bonds, commodities, derivatives or a mix of securities therefore providing diversification to build a customised investment portfolio according to financial goals at low cost than most of the other offerings.
As it is known for its diversification and can be traded on the stock exchange, ETFs ensure swift trading options based on market views and rapid development in global events.
ETFs allow minimal investment that can help beginner investors to invest with a small investment.