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What Is an ETF

An ETF is a fund that holds a basket of things, an index's companies, gold, bonds, and whose shares trade on an exchange all day like one stock, at the basket's value divided by the shares, with a yearly fee taken inside the price. This paper shows what the basket is, how the share's value is worked out on a gold example at a real price, how the fee leaks out of the price a little each day, and how an ETF appears on a platform as a stock CFD. After reading it you can read an ETF's price from its basket, find its fee, and tell GLD in the Stocks folder from XAUUSD in the Metals folder.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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An ETF, in five lines

An ETF, an exchange-traded fund, is a fund that holds a basket of things and whose shares trade on an exchange all day, like one stock. The basket can be the 500 companies of an index, gold in a vault, bonds, oil futures. The share's price is the basket's value divided by the number of shares: a gold ETF share backed by 0.09 ounce is worth 418.82 dollars at the real 25 August 2026 gold price of 4,653.58. A yearly fee is taken inside the price, 0.40 percent in this paper's example. On a platform an ETF appears as a stock CFD, SPY or GLD, trading in the exchange's hours.

A basket with one price

Picture a basket of things with one price on the side. The fund owns the things in the basket, whatever they are. A share of the fund is a slice of the basket, and the slice has one price, 418.82 dollars for the gold example. Buy the share and you own the slice; sell it and you are out. The things inside never change hands with you. That is what makes a basket of five hundred companies, or a vault of gold, tradeable in seconds as one line on a screen.

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