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How investing works

Lesson 21 · Written for kid, teen, and little

What's an ETF?

Owning 500 companies with one purchase.

The idea

Picking single winning stocks is really hard — even experts often get it wrong. An ETF is a fund you can trade on an exchange. A broad stock ETF can hold hundreds or thousands of companies, so one purchase spreads your money across many businesses. An index fund like VOO, for example, follows roughly 500 big U.S. companies. Other ETFs hold different investments, and owning a fund does not remove the risk of loss. 📦

A

Words to know

10

ETF

An exchange-traded fund holds investments and trades on an exchange. Broad stock ETFs can spread money across companies; other ETFs have different holdings and risks.

Index fund

A fund designed to follow an index. Its holdings depend on that index; a broad stock index fund can spread money across many companies.

Ticker

A fund or stock's short code — like a nickname.

S&P 500

A list of about 500 of the largest US companies, used to track how the market is doing.

VOO

An index fund that holds the ~500 big US companies in the S&P 500.

QQQ

A fund following large non-financial companies listed on Nasdaq; it is not limited to technology companies.

VTI

A fund that broadly tracks publicly traded U.S. stocks, rather than every U.S. business.

VXUS

A fund that holds companies from around the world OUTSIDE the US.

BND

Bonds are loans to issuers. BND tracks a broad index of taxable investment-grade bonds denominated in U.S. dollars; it does not hold every bond.

Fee (expense ratio)

A fund’s yearly operating costs expressed as a percentage of its assets. Compare the current published expense ratio and other costs.

Try it — no accountTrue or false

ETFs = basket of stocks in one ticker. Swipe RIGHT for TRUE, LEFT for FALSE.

Card 1 of 5

Buying 1 share of VOO instantly gets you a piece of all 500 biggest US companies.

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In the full lesson

  1. 1True or false

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