ETF
An exchange-traded fund is a basket of assets that trades on an exchange like a single share. One purchase gives you exposure to everything inside the basket.
Instead of buying fifty companies individually, you can buy one ETF that holds all fifty. This delivers diversification in a single transaction, at a fraction of the cost and effort. ETFs exist for equity indices, bonds, commodities, currencies, sectors, and specific themes.
Most ETFs are passive: they track an index and simply hold what the index holds, which keeps ongoing charges low. Active ETFs, where a manager selects the holdings, charge more and aim to beat a benchmark rather than match it.
Because ETFs trade throughout the session, their market price can drift slightly from the value of their underlying holdings. Authorised participants arbitrage that gap away by creating and redeeming units, which is what normally keeps the two closely aligned.
Costs and structure deserve attention. The expense ratio is charged annually against your holding. Tracking difference measures how far the fund lags its index in practice. Synthetic ETFs use swaps rather than owning the assets outright, which introduces counterparty risk that physical ETFs do not carry.
TrustFinance reviews the platforms through which ETFs are bought and held, so you can compare dealing charges, custody, and regulatory protection alongside the fund’s own costs.