An Exchange Traded Fund (ETF) is a collection of tens, hundreds, or sometimes thousands of stocks or bonds in a single fund. ETFs are traded on major stock exchanges, like the New York Stock Exchange and Nasdaq. Of course, you will buy and sell them through a brokerage account at your mutual fund company. Although ETFs and mutual funds share many similarities, there are a couple of distinguishing characteristics that may make ETFs more attractive to some investors, including lower investment minimums when you first start investing and real-time pricing every time you buy and sell.
Mutual funds themselves are not traded on any stock market. The mutual fund owns stocks that are traded on the stock market(s) and the value of the mutual fund is calculated at the end of each day based on the closing price of the mutual fund’s stocks. This is similar to owning a stock portfolio and calculating at the end of each day what your stocks are worth based on its closing prices. ETFs are listed stocks themselves, and the ETF owns a portfolio of stocks just like a mutual fund. However, the ETF price in the market fluctuates just like a listed stock, depending on the buying (demand) and selling (supply) of that ETF. For example, Vanguard offers 80 ETFs with various portfolios of stocks and bonds and levels of risk.