Baskets that trade like stocks
ETFs
What is it?
An ETF holds a basket of assets — often mirroring an index — and trades on the exchange throughout the day.
How does it work?
Buy ETF units through your broker like a stock. You can transact at live market prices.
Benefits
- Very low expense ratios
- Intraday liquidity
- Simple exposure to entire markets or themes
Risks
- Bid-ask spreads and tracking error
- Some ETFs are illiquid
Important terms
- Tracking Error
- Deviation between ETF returns and its index.
- AUM
- Fund size — larger is usually more liquid.
- iNAV
- Indicative NAV updated intraday.
Common mistakes
- • Buying illiquid ETFs at bad prices
- • Assuming all ETFs are passive
Beginner tips
- • Prefer high-AUM ETFs
- • Understand what index it tracks
- • Use limit orders
Educational only. This page explains how etfs work. It is not a recommendation to buy, sell, or hold any specific asset.