Investor's Manual: What Is An Exchange-Traded Fund (ETF)?

An exchange-traded fund (ETF) is listed on an exchange and can be traded like a stock, allowing investors to buy or sell shares in the collective performance of an entire stock or bond portfolio or an index as a single security. ETFs are subject to risks similar to those of stocks, including short-selling and margin account maintenance.

ETFs are baskets of securities that typically track a sector-specific, country-specific, or a narrow- or broad-market index and are thus considered to be passively managed (Meaning that, in most cases, someone isn’t actively choosing which stocks to buy and sell.) They’re listed on exchanges just like stock, so you can conveniently trade them through your brokerage account. Keep in mind that the risks you face when trading equities are the same risks you face when trading ETFs.

Time to Hit the Market?

Ready to start your search for the ETFs that best fit you? TD Ameritrade clients can start with the TD Ameritrade ETF Market Center, which provides a broad selection of ETF research tools and third-party market insights and analyses. And, it’s home to a list of more than 300 commission-free ETFs, which can provide you with a wide range of potentially low-cost investment opportunities.

Visit this page for a side-by-side comparison of ETFs and mutual funds.

Also, watch the video below to learn more about ETFs.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

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