ETF (Exchange-Traded Fund)
An ETF is a basket of investments — often an entire index like the S&P 500 — that trades on an exchange like a single stock. It gives you instant diversification at a very low cost, and unlike a mutual fund you can buy or sell it anytime the market is open.
The tax advantage is structural rather than marketing. When a mutual fund investor sells, the fund may have to sell holdings to raise cash, distributing capital gains to everyone who stayed — including people who bought that year. An ETF's creation-and-redemption mechanism largely avoids this, so taxable ETF holders are less likely to receive a gain they did not choose to realise. Inside an IRA or 401(k) the distinction disappears entirely, since nothing is taxed there. ETFs also trade throughout the day, which is a genuine convenience and a mild hazard, because the ability to trade instantly serves no long-term investor. A total-market or S&P 500 ETF is the simplest single holding.
Put it to work
Investment Calculator
Project an investment portfolio's growth with monthly contributions — final value, your money vs market growth, and the year-by-year path.
ROI Calculator
Measure the return on any investment: total gain, total return (ROI), and the annualized return (CAGR) that lets you compare deals held for different lengths of time.