An exchange-traded fund is a pooled investment vehicle whose shares trade on a stock exchange throughout the day, rather than being priced once daily like a mutual fund.
A mutual fund transacts once a day at a computed net asset value. An ETF trades on an exchange continuously, at whatever price a buyer and seller agree.
That means an ETF has a market price and a net asset value, and they are not necessarily the same number at any given moment.
The mechanism that keeps those two numbers close is arbitrage by authorised participants — large institutions that can create new shares by delivering the underlying holdings, or redeem shares by taking holdings back.
When the market price drifts from the underlying value, that trade becomes profitable, and doing it pushes the prices back together.
ETF describes the wrapper, not the strategy. Most assets in ETFs track an index, but the structure also holds actively managed strategies. The label says how it trades, not how it is managed.
The prospectus, which is the only document that describes objectives, risks, costs, and holdings in full. Nothing on this site is a recommendation of any fund, and fund performance information belongs in the fund's own materials rather than anywhere else.
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