4 Quick Facts That Simplify ETFs (Exchange-Traded Funds)

ETFs are investment securities you should know about and understand

Tunji Onigbanjo
5 min readApr 27, 2020
ETF on Blackboard by Marco Verch

An ETF, exchange-traded fund, is a security that trades on stock exchanges and tracks an underlying basket of securities, such as stocks, bonds, or commodities. Most ETFs track an index, such as a stock index like the S&P 500 Index or a bond index like the Bloomberg Barclays Aggregate Index. ETFs allow you to easily buy and sell a basket of securities without having to buy each of the securities individually. The first major ETF was launched in 1993. Today, the United States ETF industry has over $4 trillion of assets under management. For a brief history of ETFs, you can check out this article. ETFs can be slightly confusing to a person new to them, but once you understand the 4 quick facts below, you will be able to better understand the industry and ETFs in general.

Disclaimer: I am not a financial advisor. I do not know your financial situation. I am purely sharing the information I have learned for educational purposes.

1. Buying a Share of an ETF Is Buying a Share of the Basket It Tracks

When you buy a share of an ETF, you are not buying each component that the ETF consists of. You are buying a share of that basket. Buying a…