{"concept":{"id":23,"slug":"etf","term":"ETF","shortDefinition":"An exchange-traded fund that pools many assets into a single product, usually tracking an index -- bought and sold like a stock.","longDefinition":"An ETF (Exchange-Traded Fund) is an investment vehicle that pools many assets -- usually the same ones that make up a stock market index, in similar proportions -- into a single product. Instead of buying each asset separately, buying one share of an ETF gives you exposure to all of them at once. Unlike a traditional fund, an ETF trades on an exchange: it has a price that moves in real time during market hours, and it's bought and sold using the same order types as a stock, through a broker."},"relations":{"requirement":[],"contrast":[{"concept":{"id":24,"slug":"index-fund","term":"Index fund","shortDefinition":"An investment fund that tracks an index, just like an ETF, but is bought and sold once a day at its net asset value, not in real time like an ETF.","longDefinition":"An index fund pursues the same goal as an ETF tracking the same index -- matching its performance -- but it doesn't trade on an exchange. It's bought and sold directly through the fund's management company (or a broker acting as an intermediary), at a single price calculated at the end of the day -- the net asset value (NAV) -- with no ability to choose the exact price during the day, unlike an ETF. It typically makes recurring automatic contributions of any amount easy, without the trading cost of each individual ETF purchase on an exchange."}}],"related":[{"concept":{"id":5,"slug":"stock-market-index","term":"Stock market index","shortDefinition":"An indicator that summarizes, in a single number, the combined performance of a specific group of stocks -- usually the most representative ones on an exchange, in a country, or in a sector.","longDefinition":"An index is not a stock you can buy directly: it's an aggregate measure, calculated according to each index's own rules (which companies it includes, how it weights each one, how often it reviews its composition). It serves as a quick benchmark for market performance and as a comparison point for portfolios and funds, but it doesn't measure a country's economy as a whole, nor does it include every company listed on an exchange."}},{"concept":{"id":25,"slug":"ter","term":"TER (Total Expense Ratio)","shortDefinition":"The total annual cost of maintaining an ETF or index fund, expressed as a percentage of the amount invested -- distinct from the broker's trading commission.","longDefinition":"TER (Total Expense Ratio) is the total annual cost of managing an ETF or index fund, expressed as a percentage of the amount invested -- it includes the management fee and other operating expenses of the vehicle itself. It's automatically deducted from the ETF's or fund's value each year, with no separate payment required from the investor, and it's distinct from the brokerage commission the broker charges per trade. Although it's usually expressed as a small percentage, its effect compounds year after year on the total capital invested, not only on the gain, so it can add up to a meaningful difference over long horizons."}}],"calculatedBy":[]},"curricularPosition":[{"id":20,"moduleId":7,"slug":"what-is-an-etf-and-how-does-it-track-an-index","title":"What is an ETF and how does it track an index?","summary":"You understand what an ETF is, how it tracks an index, and why it's bought and sold like a stock.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you understand what an ETF is, how it tracks an index, and why it's bought and sold like a stock.\n\n## Content\n\nAn ETF -- Exchange-Traded Fund -- is an investment vehicle that pools many assets into a single product. The most common approach is for an ETF to track a stock market index: instead of trying to individually pick which assets to buy, the ETF buys, approximately, the same assets that make up that index, in similar proportions, so its performance closely resembles that of the full index.\n\nThis has a direct practical consequence: buying a single share of an ETF that tracks an index gives you exposure to every company in it at once, instead of having to buy each stock separately -- a single trade, instead of dozens.\n\nUnlike other vehicles you'll see in the next module, an ETF trades on an exchange just like a stock: it has a price that varies continuously during market hours, and it's bought and sold using the same order types you've already seen -- market order, limit order -- through your broker.\n\n## Example\n\nAn ETF that tracks a broad stock market index buys, approximately, the same companies that make up that index, in similar proportions. Buying a share of that ETF gives you exposure to all of those companies at once, without having to buy each stock individually.\n\n## Common mistakes\n\n- Thinking an ETF is a single company or a single asset -- it's a vehicle that pools many different assets into a single product.\n- Believing an ETF can only be bought or sold once a day -- that's characteristic of a different type of vehicle, not an ETF, which trades in real time during market hours.\n\n## Summary\n\nAn ETF is an exchange-traded fund that pools many assets, typically tracking an index, and it's bought and sold on an exchange just like a stock, in real time during market hours.\n\n## Self-check\n\nWhat does it mean for an ETF to \"track\" an index?\n\nWhy can buying an ETF be simpler than buying every stock in an index separately?","bodyHtml":"<h2>Objectives</h2>\n<p>By the end of this lesson you understand what an ETF is, how it tracks an index, and why it's bought and sold like a stock.</p>\n<h2>Content</h2>\n<p>An ETF -- Exchange-Traded Fund -- is an investment vehicle that pools many assets into a single product. The most common approach is for an ETF to track a stock market index: instead of trying to individually pick which assets to buy, the ETF buys, approximately, the same assets that make up that index, in similar proportions, so its performance closely resembles that of the full index.</p>\n<p>This has a direct practical consequence: buying a single share of an ETF that tracks an index gives you exposure to every company in it at once, instead of having to buy each stock separately -- a single trade, instead of dozens.</p>\n<p>Unlike other vehicles you'll see in the next module, an ETF trades on an exchange just like a stock: it has a price that varies continuously during market hours, and it's bought and sold using the same order types you've already seen -- market order, limit order -- through your broker.</p>\n<h2>Example</h2>\n<p>An ETF that tracks a broad stock market index buys, approximately, the same companies that make up that index, in similar proportions. Buying a share of that ETF gives you exposure to all of those companies at once, without having to buy each stock individually.</p>\n<h2>Common mistakes</h2>\n<ul><li>Thinking an ETF is a single company or a single asset -- it's a vehicle that pools many different assets into a single product.</li><li>Believing an ETF can only be bought or sold once a day -- that's characteristic of a different type of vehicle, not an ETF, which trades in real time during market hours.</li></ul>\n<h2>Summary</h2>\n<p>An ETF is an exchange-traded fund that pools many assets, typically tracking an index, and it's bought and sold on an exchange just like a stock, in real time during market hours.</p>\n<h2>Self-check</h2>\n<p>What does it mean for an ETF to &quot;track&quot; an index?</p>\n<p>Why can buying an ETF be simpler than buying every stock in an index separately?</p>","sortOrder":1,"readingMinutes":5,"difficulty":"Básico","url":"/en/academy/fundamentals/etfs/what-is-an-etf-and-how-does-it-track-an-index"}],"graphSummary":{"root":{"type":"concept","id":"23","depthFromRoot":0,"entity":{"type":"concept","slug":"etf","term":"ETF","excerpt":"Fondo cotizado en bolsa que agrupa muchos activos en un solo producto, normalmente replicando un índice -- se compra y se vende como una acción."}},"depth":1,"returnedNodes":1,"truncated":false,"hasCycle":false,"nodes":[{"type":"concept","id":"23","depthFromRoot":0,"entity":{"type":"concept","slug":"etf","term":"ETF","excerpt":"Fondo cotizado en bolsa que agrupa muchos activos en un solo producto, normalmente replicando un índice -- se compra y se vende como una acción."}}],"edges":[]},"relatedNews":[],"relatedEntities":[]}