Exchange traded funds are a type of investment tool that allow the average retail investor to easily gain exposure to a wide range of broad markets and specific strategies.

Speaking with the Washington Post, Michael Sapir, founder and chairman of ProShares, explains the ETF investment as a “mutual fund that trades on a stock exchange.”

“In a no-load mutual fund, generally you are buying directly from the fund company. In an ETF, you are buying the fund over a stock exchange just like you would buy a share of stock,” Sapir said in the article.

The ETF is seen as a good fit for both retirement and general investment accounts due to their low costs, tax efficiency, transparency and broad market coverage.

“ETFs are the most important investment vehicle developed in 50 years,” Sapir said. “ETFs have come along during an inflection point in how investors look at investing. What we see investors wanting is a realistic return while trying to reduce the volatility of ups and downs in their portfolio.”

Next page: Know your holdings

Showing Page 1 of 2