What does an exchange-traded fund, or ETF, trade like during the day?

An exchange-traded fund, or ETF, trades like an individual stock during the day. Investors can typically buy and sell ETF shares on an exchange throughout the trading session at market prices.

An ETF holds a portfolio of assets, such as stocks, bonds, commodities, or a mixture of investments. Each ETF share represents an interest in that portfolio, but the investor trades the share rather than directly buying every underlying security.

Many ETFs are designed to track an index, although some are actively managed. Their exchange trading distinguishes them from traditional mutual funds, which are generally bought or sold from the fund company at a price calculated once each business day.

ETF prices can briefly trade above or below the value of their underlying holdings. Authorized participants and the creation-and-redemption process are intended to help keep the market price close to the portfolio’s net asset value.