What Is an ETF?

An ETF, or “Exchange Traded Fund”, is like a basket of stocks.

You can spend £40 on one whole share of an ETF, and that £40 is automatically invested in all the companies contained within the basket.

If one company goes down, you won’t lose much because the other stocks can still go up, balancing out your losses.

For example the S&P 500 is made up of the 500 top US companies – even if 100 of these stocks went down, the other 400 stocks that are still rising are likely to cancel out any losses, leading to an overall increase in value.

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