From the course: Financial Basics Everyone Should Know

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Investing with ETFs

Investing with ETFs

From the course: Financial Basics Everyone Should Know

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Investing with ETFs

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- [Instructor] While many investors use mutual funds to invest in the stock market, you should consider a similar option called an exchange-traded fund or an ETF. An ETF is a basket of stocks that trade through an exchange, just like a regular stock does. Let's talk about how they work, but first let me explain what an ETF is versus a mutual fund and how the two differ, because many people often have this question. With mutual funds, you can buy shares as a way to invest money. Those shares are not traded on an exchange. The mutual fund is run by a manager who picks specific stocks to invest in. Also, a mutual fund tries to beat or outperform the market. The ETF is not there to beat the market. It is there to track some part of that market. For that reason, mutual funds are active investments. They're actively picking specific stocks or securities they think will outperform. Mutual funds tend to have higher fees associated with them because of this effort to outperform. In contrast…

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