Definition: ETF is short for "Exchange-Traded Fund." An ETF holds a basket of securities and trades on a stock exchange. The market value of an ETF changes throughout the day based on the supply and demand for each individual ETF. The net asset value (value of the securities within the fund) of an ETF may differ from the market value (price that an investor purchases/sells the ETF) due to the supply and demand effect.
Examples:
A well-known ETF is the Spiders or SPDRs. SPDRs hold all of the stocks in the S&P 500 Index.
