How Are ETFs Different From Stocks?
Stocks give shareholders a claim on a company's assets and earnings, while mutual funds and ETFs offer diversified, market-wide exposure through a collection of underlying stocks.
Video Transcript
A stock is a financial security issued by a company to a shareholder. It gives you as the shareholder a claim to that company's net assets and future earnings. Mutual funds and exchange traded funds are a little different. They trade like stocks on the New York Stock Exchange or the NASDAQ, but they're actually a fund style vehicle that consists of many, many underlying stocks. These fund style vehicles give you a great way to gain diversified access to an entire market or a sector of a market.
