This report explains what Exchange-Traded Funds, or ETFs, are and how they work in the financial markets.
- ETFs are investment funds that hold a mix of assets, like stocks or bonds, and trade on stock exchanges. Despite seeing significant growth since 2000, the U.S. ETF market is small compared to other U.S. markets (fixed income, equities, mutual funds).
- People invest in ETFs to easily buy and sell a wide variety of assets in a single fund, which can help them diversify and manage risk. ETFs may also provide greater tax efficiencies and lower total expense ratios compared to mutual funds with similar investment strategies.
- The report describes how ETFs are created, traded, and regulated to keep the market stable and transparent. By understanding ETFs, we can understand how these funds help Americans save for the future, invest more safely, and grow their wealth.