Investing · 4 min read
ETFs: The Basket That Trades
An ETF (Exchange-Traded Fund) is a basket of assets — like an index — that trades on the stock exchange like a share.
Why it matters
ETFs offer low-cost, transparent exposure to entire markets or themes.
Advantages
- Low expense ratios
- Intraday liquidity
- Broad diversification
Risks
- Trading costs and spreads
- Tracking error
- Some ETFs are illiquid
Real-world example
A NIFTY 50 ETF gives you exposure to India's 50 largest companies with one trade.
Key takeaways
- Prefer high-AUM, liquid ETFs
- Understand what index or theme it tracks
- Great core holding for passive investors
Quick quiz
1. ETFs are different from mutual funds because they: