From the course: Understanding Capital Markets

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Stocks, ETFs, and mutual funds

Stocks, ETFs, and mutual funds

From the course: Understanding Capital Markets

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Stocks, ETFs, and mutual funds

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- [Narrator] Investors often hear about mutual funds and ETFs when evaluating investment options, but what are they and what are the differences between these two types of baskets of stocks? Most investors should be looking for broad investment allocations rather than trying to pick individual stocks. For that reason, many investors turn to an exchange traded fund or a mutual fund. Now, both mutual funds and exchange traded funds are groups of individual stocks that can be bought as a basket by an investor to allow instant diversification. An ETF or an exchange traded fund is a basket of many stocks, trades, just like a single stock does. There are many ETFs out there. Here's how they work. Let's pretend you want to allocate 50% of the stock portion of your portfolio to value stocks. If you want to a broad basket of value stocks without having to go through and find individual companies to invest in, you might buy the Russell 1000 Value ETF or one of the many other competing value…

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