An exchange-traded fund is a basket of securities such as stocks that tracks an underlying index. An exchange-traded fund is a marketable security meaning it can be bought and sold since the ETF has a price associated with it. ETFs can contain all types of investments including stocks, commodities, or bonds.
An ETF is called an exchange-traded fund since it's traded on an exchange just like stocks. In other words, investors buy and sell an ETF with its price fluctuating over time. The price of an ETF’s shares will change throughout the day as they are bought and sold. As a result, there can be the potential for a loss to investors if the sale price is lower than the purchase price.
There are various types of ETFs available to investors that can be used for income generation, speculation, price increases, and to hedge or partly offset risk in an investor's portfolio