An exchange-traded fund (ETF) is an investment fund that tracks an index, sector, commodity or asset. It trades like a stock on an exchange and allows investors to gain exposure to a basket of equities with instant diversification at low cost. ETFs offer benefits like lower operating costs than mutual funds, flexible trading, transparency, and tax efficiency. They provide a simple way to invest in an entire market segment with characteristics like tax efficiency, low expense ratios, and continuous pricing throughout the day.