Exchange-Traded Fund (ETF) — a basket of assets such as stocks, bonds, or commodities that trades on an exchange like an individual stock.  

<h2>How It Works</h2>  
<p>An ETF pools money from many investors to buy a diversified portfolio of securities. The fund’s shares are listed on a stock exchange and can be bought or sold throughout the trading day at market prices.</p>  
<p>Most ETFs track an index, such as the S&P 500, meaning their performance mirrors that index’s returns. Some are actively managed, aiming to outperform a benchmark through strategic security selection.</p>  
<p>Creation and redemption of ETF shares involve authorized participants who exchange a basket of underlying securities for new ETF shares, or vice‑versa. This mechanism keeps the ETF’s price close to its net asset value (NAV).</p>  
<p>Investors can place limit, market, or stop orders just as they would with a single stock, providing flexibility in execution timing and price.</p>  

<h2>Why It Matters</h2>  
<p>ETFs offer low‑cost, instant diversification, making them a popular choice for both beginner and experienced investors seeking broad market exposure without buying each security individually.</p>  
<p>For example, an investor wanting exposure to the technology sector can purchase shares of a technology‑focused ETF in a single transaction, gaining diversified holdings across dozens of tech companies while paying a fraction of the cost of buying each stock separately.</p>  
<p>Additionally, the intraday tradability of ETFs allows investors to react quickly to market news, implement tactical strategies, or use them as building blocks for more complex portfolios.</p>