Funds
ETF (Exchange-Traded Fund)
A fund that holds a basket of assets (stocks, bonds, etc.) and trades on an exchange like an individual stock.
Example
Buying one share of an S&P 500 ETF gives you fractional exposure to all 500 companies in the index in a single trade, instead of buying 500 individual stocks.
Common Misconception
Not all ETFs are low-cost, diversified, and low-risk — leveraged and sector-specific ETFs can be just as volatile (or more so) than individual stocks, despite the "fund" label.
Why It Matters
Broad-market ETFs are one of the lowest-cost ways to build diversified exposure, which is why they're a common default recommendation for long-term, hands-off investing.