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Back to Basics: What is an ETF?

Amy Thompson-Cobb, aged 10, asks Morningstar analyst Helaine Kang what an exchange traded fund is and how it works

Holly Black 27 September, 2019 | 9:36

Amy Thompson-Cobb: Hello. My name is Amy Thompson-Cobb, and this is Helaine Kang, and today, we are going to be talking about ETFs. What is an ETF?

Helaine Kang: ETF stands for exchange-traded fund. So, ETFs are index funds that track certain indices, or a basket of securities selected via certain criteria. And index funds are a sort of mutual fund. The underlying assets can be anything from equities, bonds or other asset classes like properties or commodities. The main advantage of ETFs is it definitely makes investors' lives easier, because you don't need to select individual bonds or stocks individually, but you buy the whole basket. So, you don't need to study the whole individual assets and then pick your own portfolio.

Thompson-Cobb: When is it good to use an ETF?

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About Author

Holly Black

Holly Black  is Senior Editor, Morningstar.co.uk

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