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Exchange-Traded Fund (ETF)

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    Key Takeaways

    • An ETF is a pooled investment vehicle that trades on a stock exchange and typically tracks an index, sector, or asset class.
    • REIT ETFs provide investors with diversified exposure to the real estate sector without requiring the direct purchase of individual REIT stocks.
    • Like individual REITs, many REIT ETFs pay dividends and can be bought and sold throughout the trading day at market prices.

    What is an Exchange-Traded Fund?

    An exchange-traded fund (ETF) is a type of investment fund that holds a collection of assets—such as stocks, bonds, or REITs—and trades on a stock exchange like an individual stock. ETFs are typically designed to track the performance of a specific index, sector, market segment, or asset class.

    How do ETFs relate to REITs?

    REIT ETFs allow investors to gain broad exposure to the real estate sector by investing in a fund that holds a portfolio of REITs and often tracks a real estate index, such as the FTSE Nareit All Equity REITs Index. This approach provides diversification across property sectors and geographic markets without requiring investors to research and select individual REIT stocks.

    Related Terms