Exchange-traded fund

An exchange-traded fund (ETF) is like a basket of toys that you can buy in the toy store. Just like how you can pick out different toys to put in your basket, an ETF is a basket of different stocks, bonds, or other things like commodities (which are goods that we buy or sell like gold, silver, and oil) that you can buy on the stock market. So instead of buying just one toy or stock, you can buy a basket of them all at once!

Now imagine that you bought some toys, but then you decided you didn't want them anymore. You might try to sell them back to the toy store. Similarly, with an ETF, if you want to sell it, you can sell it back on the stock market to another investor.

The cool thing about an ETF is that it’s easy to buy and sell, just like toys in a toy store! Plus, because an ETF is like a basket of different things, it can help you get more diversified, which means your money is spread out across different things instead of just one. Just like how you wouldn't want all your toys to be the same, you don't want all your money invested in just one stock, bond, or commodity. That's why many grown-ups like ETFs, because they can help spread their money out and reduce risk.