ETF

An ETF, or exchange traded fund, is a basket of many holdings packaged so it can be bought and sold like a single stock. One share of an ETF gives you a slice of every company inside it, sometimes hundreds at once.

The main advantage is diversification with a small amount of money. Buying the 500 largest US companies individually would take a fortune; one share of an S&P 500 ETF costs a few hundred. If one company collapses, the damage to the whole is small.

Fees are also far lower than traditional funds. Actively managed funds often charge 1 to 2% a year, while an index-tracking ETF typically charges 0.05 to 0.3%. Over thirty years that gap alone changes the outcome dramatically.

Not every ETF is safe, though. Narrow thematic funds and leveraged products that multiply returns two or three times swing violently. If the name contains leveraged or inverse, treat it as a short-term instrument rather than something to hold for years.