Exchange-Traded Funds

What an ETF is

An exchange-traded fund (ETF) is an investment fund whose shares trade on a stock exchange throughout the day, just like a listed equity. Each share represents a proportional claim on a basket of underlying assets — most commonly stocks or bonds, though there are ETFs for commodities, currencies, options strategies, and more. The result is that a single trade gives you diversified exposure to whatever the ETF is designed to track.

ETFs have become the default wrapper for much of the passive-investing world because they combine the diversification of a mutual fund with the intraday liquidity and tax characteristics of a stock.

The main ETF categories

• Broad equity index ETFs. SPY, VOO, IVV track the S&P 500. VTI and ITOT cover the total US market. QQQ tracks the Nasdaq-100. Internationally, VXUS, IEFA, and VWO cover developed and emerging markets.
• Sector ETFs. The SPDR sector family (XLK for tech, XLF for financials, XLE for energy, XLV for health care, and so on) lets you tilt into or away from specific parts of the market without picking individual stocks.
• Bond ETFs. AGG and BND cover the total US bond market. TLT holds long-duration US Treasuries, LQD holds investment-grade corporates, and HYG holds high-yield credit.
• Thematic and factor ETFs. Funds that focus on a specific theme (clean energy, semiconductors, cybersecurity) or factor (value, momentum, quality, low volatility).
• Commodity and currency ETFs. GLD and IAU for gold, SLV for silver, USO for crude oil, UUP for a long-dollar position.

How ETF prices stay close to fair value

An ETF has two prices running in parallel: the market price at which the ETF shares trade on the exchange, and the net asset value (NAV) per share computed from the current prices of the underlying holdings. Market makers use a mechanism called creation and redemption — exchanging baskets of the underlying securities for blocks of ETF shares — to arbitrage any meaningful gap between the two. In normal conditions the market price tracks NAV within a few basis points.

During market stress the gap can widen temporarily, especially in fixed-income ETFs whose underlying bonds trade less actively than the ETF itself. In those moments the ETF price can actually lead rather than lag the underlying bond market.

What to look at before using an ETF

• Expense ratio. The annual fee, expressed as a percentage of assets. Broad-market equity ETFs often charge less than 0.10% per year; thematic or actively managed ETFs charge substantially more.
• Assets under management and average volume. Larger, more actively traded ETFs have tighter spreads and less risk of being closed down.
• Underlying index or strategy. Two ETFs with similar names can track very different indices with very different sector weights and rules.
• Tracking error. How closely the ETF's return matches its stated index over time.
• Distribution policy. How often dividends and interest are paid out, and whether capital gains are regularly distributed.

How ETFs sit alongside the underlying markets

Because sector ETFs like XLK and XLE track well-defined industry baskets, they are useful as a quick read on what is happening in that sector even if you do not trade them directly. Watching XLF versus TLT, for example, gives you an immediate picture of how financials are performing relative to long-duration Treasuries on any given day — a rough proxy for the market's view on interest rates.

How to use this page

The overview widget above covers the largest equity, sector, and bond ETFs in a single scannable table. The SPY technical-analysis block shows short- and long-term signals on the most traded ETF in the world. For deeper charting and multi-instrument comparisons, use the Advanced Charts page; the Screener is useful for ranking ETFs by volume, volatility, or performance.

Last reviewed on April 24, 2026. ETF investing carries market risk and may not be suitable for every investor. Nothing on this page is a recommendation to buy or sell any specific fund. See our Disclaimer.