Exchange-Traded Fund (ETF)
An ETF is a basket of investments that trades on an exchange like a stock.
Why this matters
ETFs can make diversification easier and often provide lower-cost access to broad markets.
Simple example
Buying one broad-market ETF can give you exposure to hundreds of companies in a single purchase.
Common mistakes
- Assuming every ETF is low-risk just because it is diversified.
- Ignoring ETF strategy differences (broad market vs sector vs leveraged).
- Overtrading ETFs intended for long-term investing.