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[Skip to main content](https://www.justetf.com/en/academy/what-is-an-etf.html#page-content) [](https://www.justetf.com/en/) - Search - ETF screener Find your next ETF [Find ETFs](https://www.justetf.com/en/search.html?search=ETFS) - [ETF lists by category](https://www.justetf.com/en/etf-lists.html) - [ETF comparison Compare selected ETFs](https://www.justetf.com/en/etf-comparison.html) - [Popular index comparisons](https://www.justetf.com/en/asset-comparisons/index-comparisons/) - [Popular ETF comparisons](https://www.justetf.com/en/asset-comparisons/etf-comparisons/) - [ETF providers](https://www.justetf.com/en/etf-provider/) - [List of all ETFs](https://www.justetf.com/en/etf-list-overview.html) - [List of stocks](https://www.justetf.com/en/stock-profiles/) - Markets - Best/Worst ETF performers ETF rankings at a glance [Learn more](https://www.justetf.com/en/market-overview/) - [Market overview](https://www.justetf.com/en/market-overview/equity/etf-equity-market-world.html) - [Best ETFs](https://www.justetf.com/en/market-overview/the-best-etfs.html) - [ETF investment guides ETF compass for themes, indices & co.](https://www.justetf.com/en/how-to/) - [MSCI World ETFs](https://www.justetf.com/en/how-to/msci-world-etfs.html) - [Defense ETFs](https://www.justetf.com/en/how-to/invest-in-defense.html) - [Nasdaq 100 ETFs](https://www.justetf.com/en/how-to/nasdaq-100-etfs.html) - [Bitcoin ETFs](https://www.justetf.com/en/how-to/invest-in-bitcoin.html) - [S\&P 500 ETFs](https://www.justetf.com/en/how-to/sp-500-etfs.html) - [Artificial intelligence (AI) ETFs](https://www.justetf.com/en/how-to/invest-in-artificial-intelligence.html) - [Stock investment guides Discover various categories of stocks](https://www.justetf.com/en/how-to-stocks/) - [Defense stocks](https://www.justetf.com/en/how-to-stocks/defense-stocks/) - [Dividend stocks](https://www.justetf.com/en/how-to-stocks/dividend-stocks-world/) - [US stocks](https://www.justetf.com/en/how-to-stocks/usa-stocks/) - [Chinese stocks](https://www.justetf.com/en/how-to-stocks/china-stocks/) - [AI stocks](https://www.justetf.com/en/how-to-stocks/artificial-intelligence-stocks/) - [Robotics stocks](https://www.justetf.com/en/how-to-stocks/robotics-stocks/) - Knowledge - Article overview Expand your knowledge of ETFs [Browse now](https://www.justetf.com/en/academy/academy-overview.html) - [What is an ETF?](https://www.justetf.com/en/academy/what-is-an-etf.html) - [ETF for beginners](https://www.justetf.com/en/academy/etf-for-beginners.html) - [Latest articles Analysis by our ETF experts](https://www.justetf.com/en/news/) - [Distributing or accumulating ETFs?](https://www.justetf.com/en/news/etf/distributing-or-accumulating-etfs-how-to-handle-investment-income.html) - [Create your own ETF Savings Plan: The Ultimate Guide](https://www.justetf.com/en/academy/etf-savings-plan.html) - [justETF newsletter Stay up to date](https://www.justetf.com/en/newsletter.html) - Comparisons - Broker comparison 2026 Review of all offers [Compare now](https://www.justetf.com/en/comparison/online-broker-comparison.html) - [ETF savings plan comparison Which broker is the best?](https://www.justetf.com/en/comparison/savings-plan-comparison.html) - [Child savings account comparison](https://www.justetf.com/en/vergleiche/juniordepot/) - Login - My Profile To the portfolio overview [Login](https://www.justetf.com/en/login.html) - [Sign up for free\!](https://www.justetf.com/en/registration.html) - [My Watchlists](https://www.justetf.com/en/watchlist.html?listId=first&login=true) - Deutschland/English ETF Selection 0 ETF Selection 0 Your selection basket is empty. Define a selection of ETFs which you would like to compare. Add an ETF by clicking "Compare" on an ETF profile or by checkmarking an ETF in the ETF search. My Profile - My Profile To the portfolio overview [Login](https://www.justetf.com/en/login.html) - [Sign up for free\!](https://www.justetf.com/en/registration.html) - [My Watchlists](https://www.justetf.com/en/watchlist.html?listId=first&login=true) Deutschland/English [Want to save with ETFs? Compare all offers and find a suitable broker for you - in **our ETF savings plan comparison.** Compare providers now](https://www.justetf.com/en/comparison/savings-plan-comparison.html?partnerId=281141&ref=WZCETFSPV-DE-en) 1. [Home](https://www.justetf.com/en/) 2. [justETF Knowledge](https://www.justetf.com/en/academy/academy-overview.html) 3. Exchange-traded funds: What is an ETF? # Exchange-traded funds: What is an ETF? by [Dominique Riedl](https://www.justetf.com/en/about/team/dominique-riedl/ "Dominique Riedl")  #### With ETFs (Exchange Traded Funds), you can invest in shares easily and cheaply and build up assets over the long term. An ETF is an exchange-traded index fund that tracks the performance of well-known market indices one-to-one.  - Level: For beginners - Reading duration: 5 minutes What to expect in this article - [How do ETFs work?](https://www.justetf.com/en/academy/what-is-an-etf.html#work) - [What is a fund?](https://www.justetf.com/en/academy/what-is-an-etf.html#What%20is%20a%20fund) - [How an investment fund works](https://www.justetf.com/en/academy/what-is-an-etf.html#investment%20fund%20works) - [What is an index fund?](https://www.justetf.com/en/academy/what-is-an-etf.html#What%20is%20an%20index%20fund) - [What is an ETF - Explained simply with the example of EURO STOXX 50](https://www.justetf.com/en/academy/what-is-an-etf.html#Explained%20simply) - [What does exchange-traded mean?](https://www.justetf.com/en/academy/what-is-an-etf.html#exchange-traded%20mean) - [Why doesn't my bank advisor recommend ETFs?](https://www.justetf.com/en/academy/what-is-an-etf.html#never%20heard) An exchange-traded fund (ETF) is a fund that tracks an [index](https://www.justetf.com/en/academy/what-is-an-index.html) like the [FTSE 100](https://www.justetf.com/en/how-to/ftse-100-etfs.html) or [EURO STOXX 50](https://www.justetf.com/en/how-to/euro-stoxx-50-etfs.html) and trades like a share. An ETF combines the benefits of a fund and a share in one security. ## How do ETFs work? ETFs enable you to invest cost-effectively in entire markets with one security. For example, with a single [MSCI World ETF](https://www.justetf.com/en/how-to/msci-world-etfs.html), you spread your investment over around 1,600 companies from all over the world. In addition to equities, you can also invest in many other [asset classes](https://www.justetf.com/en/news/passive-investing/an-introduction-to-the-main-asset-classes-for-etf-investors.html) with ETFs. Owing to this variety, ETFs are the perfect building blocks for private financial investments. ETFs simply copy a market index one-to-one and can be traded at any time on the stock exchange like a share. **justETF tip:** ETFs offer numerous advantages: they are cost-effective, safe, transparent, widely diversified, flexible and liquid. Read more about the [advantages of ETFs](https://www.justetf.com/en/news/etf/the-advantages-of-etf-investing.html) here. ### An ETF is an exchange-traded fund that tracks an index The mode of operation and the advantages of an ETF can be best explained on the basis of three parts, from which the term “exchange-traded index fund” is formed. ![An ETF is an exchange-traded fund that tracks an index]() ## What is a fund? An investment fund is a collection point for the investors capital. To put it simply, thousands of investors pool their funds and give the order to a professional (fund manager), to invest the funds as profitably as possible and with wide diversification in the context of a specified investment strategy. ### How an investment fund works ![How an investment fund works]() The investment classes (e.g. shares, [bonds](https://www.justetf.com/en/news/etf/investing-in-bonds-with-an-etf.html) and [commodities](https://www.justetf.com/en/news/etf/commodity-investing-with-etfs.html)) in which the fund manager may invest is determined in the investment strategy. In an investment fund, the investors’ assets are segregated. Thus, the funds are held in trust by a depository bank and are legally separated from the assets of the investment company. Therefore, the investor’s capital is protected even in case of insolvency of the investment company. The manager of a typical mutual fund has the task to achieve a higher return on investment than the respective benchmark. However, according to academics, only a very few [fund managers](https://www.justetf.com/en/news/etf/etf-portfolios-versus-active-fund-portfolios-who-wins.html) succeed in this in the long run (period of more than 3 years). ## What is an index fund? The provider of an index fund ensures that it represents the development of an index as accurately as possible. The investments of an index fund (constituents and weightage) are exactly specified by the index. Indices are market barometers, which make the performance or return of total markets determinable. An index fund has the great advantage that you, as an investor, always know where you have invested. As the composition of the underlying index such as the EURO STOXX 50 is always known. The European stock index (EURO STOXX 50) includes the shares of the 50 largest stock corporations of the Eurozone, weighted according to their size (as measured by the free-float market capitalization). Stay up to date Free English newsletter including the latest news & knowledge about investing in ETFs. [Subscribe now](https://www.justetf.com/en/newsletter.html?partnerId=281180&ref=TTnewsletter*DE*en*LP*EMPTY "Stay up to date") ## What is an ETF - Explained simply with the example of EURO STOXX 50 No elaborate analyses are required for stock picking due to [index replication](https://www.justetf.com/en/academy/etf-replication-methods.html) in the case of index funds/ETFs (in comparison to the active investment funds). For this reason, the [ETF provider](https://www.justetf.com/en/etf-provider/) receives only low annual fees for his service. ETFs are, therefore, also significantly cheaper than traditional mutual funds - and in most cases show better performance. ## What does exchange-traded mean? ETFs are traded on the stock exchange similar to shares. Thus, you can buy and sell ETFs at any time during trading hours. In comparison to this, typical mutual funds are traded only once a day via the investment company. While high upfront loads generally incur for the mutual funds, only the order fees of the bank and a usually small bid and ask difference (spread) at the time of trading on the exchange are paid for the [trading of ETFs](https://www.justetf.com/en/academy/how-does-etf-trading-work.html). ## Why doesn't my bank advisor recommend ETFs? ETFs are unpopular products within commission-oriented financial advisors and branch banks. The reason for that is that these advisors usually live off commissions paid to them by the respective fund providers for selling their financial products. However, these commissions do not exist for ETFs. That is why most investment advisors are not overly interested in introducing ETFs to you (independent fee-based advisors are the exception here). Still, it does not change the fact that ETFs are an excellent way to take your finances into your own hands - especially if you are still a beginner when it comes to investing.  How to invest in a specific theme, index, region, country or sector? Dividends, bitcoin or renewable energies: With ETFs you can invest in themes and current trends. [To our investment guides](https://www.justetf.com/en/how-to/?partnerId=281180&ref=TThowto*DE*en*LP*EMPTY "How to invest in a specific theme, index, region, country or sector?") Related articles on [ETF basics](https://www.justetf.com/en/academy/academy-overview.html#etf-basics) - [![Low Volatility ETFs: defensive equities that reduce downside risk]() Low Volatility ETFs: defensive equities that reduce downside risk](https://www.justetf.com/en/academy/low-volatility-etfs.html) - [![Beat your bank account with investing]() Beat your bank account with investing](https://www.justetf.com/en/academy/beat-your-bank-account-with-investing.html) - [![3 types of ETFs every investor should know about]() 3 types of ETFs every investor should know about](https://www.justetf.com/en/academy/3-types-of-etfs.html) - [![Savings plan vs. one-off investment]() Savings plan vs. one-off investment](https://www.justetf.com/en/academy/saving-plan-vs-one-off-investment.html) - [![How to Choose a Global ETF (step-by-step)]() How to Choose a Global ETF (step-by-step)](https://www.justetf.com/en/academy/how-to-choose-a-global-etf.html) - [![7 questions all ETF beginners ask themselves]() 7 questions all ETF beginners ask themselves](https://www.justetf.com/en/academy/diy-etf-investment.html) Further interesting articles - [![Distributing or Accumulating ETFs: How to handle investment income]() Distributing or Accumulating ETFs: How to handle investment income](https://www.justetf.com/en/news/etf/distributing-or-accumulating-etfs-how-to-handle-investment-income.html) - [![How to get a globally diversified portfolio with just one ETF]() How to get a globally diversified portfolio with just one ETF](https://www.justetf.com/en/academy/how-to-get-a-globally-diversified-portfolio-with-just-one-etf.html) - [![How to invest in real estate with ETFs]() How to invest in real estate with ETFs](https://www.justetf.com/en/news/etf/how-to-invest-in-real-estate-with-etfs.html) - [![Avoiding ETF performance pitfalls]() Avoiding ETF performance pitfalls](https://www.justetf.com/en/news/etf/avoiding-etf-performance-pitfalls.html) [ Dominique Riedl Founder of justETF Dominique Riedl is the founder of justETF. He worked for justETF until the end of 2024, most recently in an advisory capacity. He has many years of experience in structuring, managing and controlling large assets. After studying business administration at the Universities of Applied Sciences in Nürtingen and Solothurn and at the Rotterdam School of Management, he worked as an analyst and customer advisor at Flossbach von Storch AG. He developed his passion for ETFs while searching for a simple and effective way to implement investment strategies.](https://www.justetf.com/en/about/team/dominique-riedl/) Search by topic Articles by topic - [ETF basics](https://www.justetf.com/en/academy/academy-overview.html#etf-basics) - [How ETFs work](https://www.justetf.com/en/academy/academy-overview.html#how-etfs-work) - [Expert knowledge on ETFs](https://www.justetf.com/en/academy/academy-overview.html#expert-knowledge-on-etfs) - [Investment themes](https://www.justetf.com/en/academy/academy-overview.html#investment-themes) [Article overview](https://www.justetf.com/en/academy/academy-overview.html) [Latest articles](https://www.justetf.com/en/news/) - [ Scalable Overnight Account with 2.5% interest: How to Activate the new offer](https://www.justetf.com/en/academy/scalable-capital-overnight-account-news.html) - [ Low Volatility ETFs: defensive equities that reduce downside risk](https://www.justetf.com/en/academy/low-volatility-etfs.html) - [ ETF asset allocation quilt 2025](https://www.justetf.com/en/academy/etf-asset-allocation-quilt.html) [Popular articles](https://www.justetf.com/en/academy/) - [ Criticism of the MSCI World index: is it justified?](https://www.justetf.com/en/academy/criticism-of-the-msci-world.html) - [ Investing in specific countries with ETFs](https://www.justetf.com/en/news/etf/investing-in-specific-countries-with-etfs.html) - [ The Advantages of ETF Investing](https://www.justetf.com/en/news/etf/the-advantages-of-etf-investing.html) Become an ETF expert with our monthly newsletter [Sign up free now](https://www.justetf.com/en/newsletter) [](https://www.justetf.com/en/) justETF is the leading knowledge base for your ETF strategies. 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 - Level: For beginners - Reading duration: 5 minutes What to expect in this article - [How do ETFs work?](https://www.justetf.com/en/academy/what-is-an-etf.html#work) - [What is a fund?](https://www.justetf.com/en/academy/what-is-an-etf.html#What%20is%20a%20fund) - [How an investment fund works](https://www.justetf.com/en/academy/what-is-an-etf.html#investment%20fund%20works) - [What is an index fund?](https://www.justetf.com/en/academy/what-is-an-etf.html#What%20is%20an%20index%20fund) - [What is an ETF - Explained simply with the example of EURO STOXX 50](https://www.justetf.com/en/academy/what-is-an-etf.html#Explained%20simply) - [What does exchange-traded mean?](https://www.justetf.com/en/academy/what-is-an-etf.html#exchange-traded%20mean) - [Why doesn't my bank advisor recommend ETFs?](https://www.justetf.com/en/academy/what-is-an-etf.html#never%20heard) An exchange-traded fund (ETF) is a fund that tracks an [index](https://www.justetf.com/en/academy/what-is-an-index.html) like the [FTSE 100](https://www.justetf.com/en/how-to/ftse-100-etfs.html) or [EURO STOXX 50](https://www.justetf.com/en/how-to/euro-stoxx-50-etfs.html) and trades like a share. An ETF combines the benefits of a fund and a share in one security. ## How do ETFs work? ETFs enable you to invest cost-effectively in entire markets with one security. For example, with a single [MSCI World ETF](https://www.justetf.com/en/how-to/msci-world-etfs.html), you spread your investment over around 1,600 companies from all over the world. In addition to equities, you can also invest in many other [asset classes](https://www.justetf.com/en/news/passive-investing/an-introduction-to-the-main-asset-classes-for-etf-investors.html) with ETFs. Owing to this variety, ETFs are the perfect building blocks for private financial investments. ETFs simply copy a market index one-to-one and can be traded at any time on the stock exchange like a share. **justETF tip:** ETFs offer numerous advantages: they are cost-effective, safe, transparent, widely diversified, flexible and liquid. Read more about the [advantages of ETFs](https://www.justetf.com/en/news/etf/the-advantages-of-etf-investing.html) here. ### An ETF is an exchange-traded fund that tracks an index The mode of operation and the advantages of an ETF can be best explained on the basis of three parts, from which the term “exchange-traded index fund” is formed.  ## What is a fund? An investment fund is a collection point for the investors capital. To put it simply, thousands of investors pool their funds and give the order to a professional (fund manager), to invest the funds as profitably as possible and with wide diversification in the context of a specified investment strategy. ### How an investment fund works  The investment classes (e.g. shares, [bonds](https://www.justetf.com/en/news/etf/investing-in-bonds-with-an-etf.html) and [commodities](https://www.justetf.com/en/news/etf/commodity-investing-with-etfs.html)) in which the fund manager may invest is determined in the investment strategy. In an investment fund, the investors’ assets are segregated. Thus, the funds are held in trust by a depository bank and are legally separated from the assets of the investment company. Therefore, the investor’s capital is protected even in case of insolvency of the investment company. The manager of a typical mutual fund has the task to achieve a higher return on investment than the respective benchmark. However, according to academics, only a very few [fund managers](https://www.justetf.com/en/news/etf/etf-portfolios-versus-active-fund-portfolios-who-wins.html) succeed in this in the long run (period of more than 3 years). ## What is an index fund? The provider of an index fund ensures that it represents the development of an index as accurately as possible. The investments of an index fund (constituents and weightage) are exactly specified by the index. Indices are market barometers, which make the performance or return of total markets determinable. An index fund has the great advantage that you, as an investor, always know where you have invested. As the composition of the underlying index such as the EURO STOXX 50 is always known. The European stock index (EURO STOXX 50) includes the shares of the 50 largest stock corporations of the Eurozone, weighted according to their size (as measured by the free-float market capitalization). Stay up to date Free English newsletter including the latest news & knowledge about investing in ETFs. [Subscribe now](https://www.justetf.com/en/newsletter.html?partnerId=281180&ref=TTnewsletter*DE*en*LP*EMPTY "Stay up to date") ## What is an ETF - Explained simply with the example of EURO STOXX 50 No elaborate analyses are required for stock picking due to [index replication](https://www.justetf.com/en/academy/etf-replication-methods.html) in the case of index funds/ETFs (in comparison to the active investment funds). For this reason, the [ETF provider](https://www.justetf.com/en/etf-provider/) receives only low annual fees for his service. ETFs are, therefore, also significantly cheaper than traditional mutual funds - and in most cases show better performance. ## What does exchange-traded mean? ETFs are traded on the stock exchange similar to shares. Thus, you can buy and sell ETFs at any time during trading hours. In comparison to this, typical mutual funds are traded only once a day via the investment company. While high upfront loads generally incur for the mutual funds, only the order fees of the bank and a usually small bid and ask difference (spread) at the time of trading on the exchange are paid for the [trading of ETFs](https://www.justetf.com/en/academy/how-does-etf-trading-work.html). ## Why doesn't my bank advisor recommend ETFs? ETFs are unpopular products within commission-oriented financial advisors and branch banks. The reason for that is that these advisors usually live off commissions paid to them by the respective fund providers for selling their financial products. However, these commissions do not exist for ETFs. That is why most investment advisors are not overly interested in introducing ETFs to you (independent fee-based advisors are the exception here). Still, it does not change the fact that ETFs are an excellent way to take your finances into your own hands - especially if you are still a beginner when it comes to investing.  How to invest in a specific theme, index, region, country or sector? Dividends, bitcoin or renewable energies: With ETFs you can invest in themes and current trends. [To our investment guides](https://www.justetf.com/en/how-to/?partnerId=281180&ref=TThowto*DE*en*LP*EMPTY "How to invest in a specific theme, index, region, country or sector?")