What are exchange-traded funds (ETFs)?

Exchange-traded funds (ETFs) are investment funds that are traded on stock exchanges, similar to individual stocks. They typically hold a diversified portfolio of assets, which may include stocks, commodities, or bonds. This structure allows investors to gain exposure to a broad range of markets or specific sectors without having to buy each underlying asset individually.

ETFs are designed to offer liquidity and flexibility, as they can be bought and sold throughout the trading day, unlike traditional mutual funds that are only traded at the end of the trading day at their net asset value. This characteristic makes ETFs an attractive option for investors looking for a more active and dynamic investment strategy.

The other options do not accurately describe ETFs. Private investment vehicles are not available to public investors and often have restrictions on who can invest. Guaranteed investment contracts are a different vehicle that typically provides a guaranteed return, reflecting fixed income investments rather than the diversified nature of ETFs. Similarly, mutual funds that are not publicly traded do not fit the definition of ETFs, as ETFs are explicitly designed to be publicly traded on exchanges, allowing for greater accessibility and liquidity.