What Is An Exchange Traded Fund (ETF)

Manu Lakshmanan

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Manu Lakshmanan WSO Editorial Board

Expertise: Consulting | Other

An Exchange Traded Fund, or ETF, is a synthetic asset which is designed to track the price of an index or commodity. ETFs can be bought and sold on a stock market like any other asset, even though it may be impossible to actually buy the asset they are based on.

ETFs can track an index by essentially being a portfolio holding the exact same stocks that make up the index in the exact same proportions, thereby mirroring the index.

Some common ETFs are based on the major global financial indices (S&P500, FTSE etc.) or on popular commodities such as gold. The most well known is called the Spider and this tracks the S&P500.

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Manu Lakshmanan

Manu Lakshmanan is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. Prior to accepting a position as the Director of Operations Strategy at DJO Global, Manu was a management consultant with McKinsey & Company in Houston. He served clients, including presenting directly to C-level executives, in digital, strategy, M&A, and operations projects. Manu holds a PHD in Biomedical Engineering from Duke University and a BA in Physics from Cornell University. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.