So if a stock is a small share of a company, an ETF is a mixture of various stocks from a bunch of different companies, all thrown together in one basket.

Simply explained:

Think of an ETF as a cheeseboard. You don’t want to eat just one big slab of brie cheese, (I mean, maybe you do, no judging here) So you’ll want to add a bit of blue cheese, swiss cheese, some cheddar, and why not some grapes and crackers while you’re at it? That sounds a lot better, right? You want variety and diversity to make it more delicious!

An ETF is a variety of stocks and securities where you can have a bit of everything.

Why is it good?

ETFs bring diversification to your portfolio. Have you ever heard the saying “don’t put all your eggs in one basket?” Investing works the same. Diversifying your portfolio (investing in many companies, not just one) reduces overall risk! Meaning, that if one company does not perform so good, at least you have many other companies in your investment portfolio that maybe are doing quite well, so you don’t have to stress about losing money over that one company.

Can I have an example?

A popular ETF is the S&P 500

This is made up of the top 500 most traded companies in the USA. So let’s say you invest $300 in this ETF, your money would then be sprinkled over these 500 companies and you would therefore own a small portion of each company!

How do I get one?

Step one: Open an investment account. Buying an ETF is the same process as buying and selling shares (stocks).

Step two: Select the ETF you want to buy. Do your research and compare with other ETFs.

Step three: Place the trade. It should be a similar process to buying a stock. A few clicks of a button and Voila!

Where do I do it?

There are many platforms you can use, here are a few examples.

eToro (Europe, US, Australia)

Interactive Brokers (Australia, US, Europe)

IG (Australia, Europe)

Self Wealth (Australia)

Robinhood (US)

I hope that helped, read this post "What The F*** is A Stock” if you want to go back to the basics!

Now I feel like eating cheese.