Similar to index funds are
exchange-traded funds, also commonly known as ETFs. Like mutual funds, ETFs can be thought of as a basket of companies. When you buy shares in an ETF, you own a slice of all the companies in that basket. There are also many different types of ETFs, catering to different investor goals, interests, or risk appetites.
So, what's the difference between an ETF and a mutual fund? The main difference is that shares in ETFs are traded on stock exchanges while shares or units in mutual funds must be bought directly from the fund.
There are also a number of other differences, such as the way ETFs and mutual funds are managed and their different cost structures, but we’ll talk about these in a later guide. For now, just remember that all funds follow the basic concept of a basket of investable assets - each put together for a different purpose, and these funds can either be invested via fund or portfolio managers, or traded directly on an exchange, like the NASDAQ or New York stock exchange.
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