Basics
Basic4 Min Read
What Is an ETF?
A fund that trades like a single stock but carries dozens of companies inside.
You cannot "buy" the Nasdaq 100. An index is a calculation, not a product. But you can buy a share of a fund that holds all 100 companies at the right weights. That fund is called QQQ, and it is an ETF.
How It Differs From a Classic Mutual Fund
| Mutual fund | ETF | |
|---|---|---|
| Trading | Once a day, at the end-of-day price | All session long, at the live price |
| Price | Net asset value computed after the close | Market price set by supply and demand |
| Expense ratio | Usually higher | Usually very low (0.03–0.20%) |
| Transparency | Holdings disclosed periodically | Holdings mostly disclosed daily |
The most important difference is the expense ratio. The gap between 1% a year and 0.05% a year can eat a quarter of your total return over thirty years of compounding.
The Kinds
- Index ETFs: track an index. SPY (S&P 500), QQQ (Nasdaq 100), DIA (Dow Jones), IWM (Russell 2000).
- Sector ETFs: hold a single sector — semiconductors, energy, banks.
- Country ETFs: hold one country's stocks. The World Markets card on this site uses them.
- Bond ETFs: carry bonds instead of stocks.
- Commodity ETFs: gold, oil, silver.
Why the Price Doesn't Match the Index
QQQ's price is not the Nasdaq 100's level; it is a fixed fraction of it. DIA trades at roughly one hundredth of the Dow. What matters is not the level but the percentage change — and that matches almost one for one.
Country funds add one more layer: the fund is in dollars and trades during US hours. The local index may have closed hours earlier in its own country, and the exchange rate may have moved in between. The direction is usually the same; the percent doesn't match exactly.
When an ETF, When a Single Stock
Buying a single stock assumes you have a view on that company. Buying an ETF admits you have a view on a theme or a market, but don't know which company will win. Both are legitimate; trouble comes from mixing them up — being right about a theme and picking the wrong company.
Where You'll See It on This Site
The index cards (Nasdaq 100, S&P 500, Dow Jones, Russell 2000) and the World Markets list are fed by ETF prices. Open an ETF's page and you'll see a fund fact box instead of company metrics: what it tracks, who manages it, and a note on how it can drift from the market it follows.