ETF

An ETF (exchange-traded fund) is a collection of securities: stocksTermStock×السهمA share of ownership in a company, bought and sold on a stock exchange, that may pay dividends and rise or fall in value.Open the term, bonds, commodities, or a mix, bundled into one fund and listed on an exchange. You buy and sell it through a brokerage account the same way you would buy a single stock. The fund itself holds the underlying assets, and you own a proportional share.

Because it gives you instant diversificationTermDiversification×التنويع الاستثماريSpreading money across different investments instead of concentrating it in one, so the entire portfolio does not collapse if one investment fails.Open the term without having to research and buy each holding separately. A single ETF can hold hundreds of stocks or bonds, spreading your money across companies, sectors, or asset classes in one transaction. The cost is also typically lower than a mutual fundTermMutual fund×صندوق مشتركA pool of money from many investors used to buy a diversified collection of stocks, bonds, or other securities under professional management.Open the term: ETFs charge an annual fee (the expense ratio) but no sales commission, and they trade at market price rather than at a daily net asset value calculated once a day. Access depends on your brokerage. Many regional platforms offer ETFs, though the selection and fees vary. Returns arrive in the currency the ETF is denominated in, which may differ from your home currency.

• An ETF is not the same as a mutual fund. Both hold a basket of securities, but an ETF trades throughout the day at changing prices while a mutual fund settles once daily. ETFs also typically charge lower fees.
• The expense ratio is an annual percentage that comes out of your returns automatically. A 0.1% ratio on a 7% return leaves you with 6.9%, compounded over decades.
• You can lose money in an ETF if the underlying assets fall in value. Diversification reduces risk but does not eliminate it.
• Some ETFs track an index (like the S&P 500) passively, while others are actively managed. Index ETFs tend to have lower fees.