What is an ETF? Let's Break it Down.

Have you ever heard of ETFs (Exchange Traded Funds) but have no clue what they are? Don't worry, in today’s 2-Minute Masters we'll give you a quick run-down of what an ETF is, why you should care, and how you can invest in them.

So, what exactly is an ETF?

An ETF (Exchange-Traded Fund) is essentially a type of investment fund that tracks a basket of stocks, bonds, or commodities which you can buy or sell on a stock exchange, just like an individual stock.

ETFs give you access to a wide variety of companies, industries or sectors, so your money is not concentrated in just one, or a few individual stocks.

But why should I care about ETFs?

Well, for starters, they can be a great way to invest in a broad range of assets in a single ETF without a lot of money. Many ETFs have low investment minimums, which means you can get started with a small amount of money. Plus, because they're traded on the stock exchange, it's easy to buy and sell ETFs online through a brokerage account.

With ETFs, you can reduce the risk of losing all your money if one company, industry or sector performs poorly. Plus, each day, the ETF manager publishes a list of all the stocks it holds, so you know exactly what you’re investing in.

If I want to start investing in ETFs, how should I go about it?

First, do your research, either online, or with the support of a qualified investment advisor. There are lots of different ETFs out there, each with their own investment objective and strategy. Look for ETFs that align with your financial goals, and risk tolerance.

Once you've identified ETFs that you're interested in, you can use your brokerage account to buy and sell them. Many online brokers offer commission-free trading on certain ETFs, which can save you money on fees.

ETF’s offer great flexibility, but don't forget to keep track of your investments and periodically review your portfolio to make sure your choices of ETF are still aligned with your investment goals.