An exchange traded fund (ETF), sits on the passive side of the ‘active vs passive debate’ so is in many ways the opposite to a mutual fund from that sense. There are many that believe that, due to their low costs, ETFs will always outperform their actively managed mutual fund competitors.
An ETF is a collection of securities, such as stocks, that tracks an underlying index. The best-known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index. ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types. They have an associated price that allows them to be easily bought and sold.