What is ETFs (Exchange-Traded Funds)?
An ETF is a basket of securities (stocks, bonds, commodities) packaged into a single tradable instrument that lists on an exchange. Unlike mutual funds (priced once daily), ETFs trade continuously at market prices. Most ETFs are passive โ they track an index like the S&P 500, Nifty 50, or sector-specific benchmarks. Active ETFs and thematic ETFs (clean energy, AI, cybersecurity) are growing categories.
Why it matters for investors
ETFs combine the diversification of mutual funds with the trading flexibility and tax efficiency of stocks. Expense ratios are typically very low (0.03% to 0.20% for index ETFs) compared to mutual funds. Passive index ETFs have absorbed massive inflows over the past decade as investors recognize that most active funds underperform their benchmark after fees.