When it comes to investing terms, some are abbreviated, some are complicated, and some are just jargon.
So, What Is An ETF Simple Explanation?
Wait, ETF again?
First, What Does ETF Mean?
ETF is an abbreviation of Exchange Traded Fund. This doesn’t simply explain what is an ETF, but at least getting closer to the answer.
The simplest way I view an ETF is, it’s a mutual fund, that is openly traded on the exchange.
Quick Mutual Fund Side Discussion: What Is A Mutual Fund?

A mutual fund is a professionally managed investment type that pools money from a group of investors, buys many types of investments(stocks, bonds, even other mutual funds or ETFs), then packages these investments into portions(like stocks) to be sold back to the investors.
Money is collected, items(investments) are purchased, and put into baskets, and those baskets are returned to investors.
Back To What Is An ETF Simple Explanation?
With mutual funds, at the end of the day, you buy and sell them. The price of the mutual fund is based on the sum of collected securities(investments) per share(in this case per basket). Price is calculated only once a day, at market closing.
With ETFs, these baskets of investments are traded(bought/sold) throughout the trading hours.
Examples: ETFs, SPY, SCHD(one of my favorites), QQQ(Oh Yeah!), etc.
This is a simple explanation of ETFs that I use to keep things simple inside my head.
BTW, ETFs are a great way to diversify since if you buy VOO(and S&P500-based ETF), one share of VOO is made up of portions of the S&P 500, 500 of the largest publicly traded companies in the United States.
Hope this helps, and if you have another way to view what is an ETF simple explanation, please leave a comment below.
![]() Myself with an interesting Bull Sculpture. Notice: No Lambo’s. :/ | Hi I’m Tom, A Blogger And A PIG Farmer. PIG Farmer as in I grow Passive Income Generators(PIG’s). I’ve been playing with stocks, mutual funds, and options for decades, as well as always working on my side hustle stacks. Unlike what you read online, I’ve yet to find a way to get rich quickly. Get Rich Quick isn’t happening for me. My journey has been long and continues. I hope to have so many PIGs I can stop working at my current job and volunteer as a medical worker overseas. Still waiting, but getting there. I still am a family man, and while on this Journey of Growing PIGs. I wanted to share my adventures(ups and downs), hoping you will contribute with your feedback and comments. Fun Fact: In my spare time, I am a Band-Dad! |