ETFs 101
A newer cousin of the mutual fund that trades on exchanges. Lower fees, intra-day pricing, and tax efficiency.
An Exchange-Traded Fund is a basket of securities packaged as a single security that trades on an exchange — just like a stock.
How ETFs differ from mutual funds
- Intra-day trading. ETFs price continuously while markets are open. Mutual funds price once at 4 PM ET.
- Lower expenses. Most large ETFs charge 0.05–0.20% — much less than active mutual funds.
- Tax efficiency. The ETF structure rarely generates capital-gains distributions, even when the underlying portfolio turns over.
- Trading flexibility. You can short, set stop orders, or buy on margin.
Popular ETFs to know
- SPY — Tracks the S&P 500. Effectively the US large-cap market in one ticker.
- QQQ — Tracks the Nasdaq 100. Heavy on tech.
- DIA — Tracks the Dow Jones Industrial Average.
- IWM — Tracks the Russell 2000 (small-cap).