Exchange-traded funds (ETFs) are index funds, which are usually passively managed. In some cases, managers depend on computer models to make decisions. The portfolios are theme-oriented, and in their composition simply mimic a securities index or some other asset model, like a business sector, geographic region or emerging industry.

As in all indexed funds, the exchange-traded fund investor owns shares of the mixture, with each share representing a proportionate amount of the whole. When compared to individual common stocks, this diversity provides a stability, although it often lacks the upside potential.

According to toni turner.com, more than 700 ETF funds trade in the US. They are valued at $700 billion. Investors can procure a fund prospectus from brokers or fund sponsors, which are usually large financial institutions like The Vanguard Group or Fidelity Investments.