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Exchange Traded Funds (ETFs) are essentially mutual fund schemes or index funds that are listed and traded on an exchange just like stocks. ETFs can be bought and sold throughout the trading day. Buying/Selling of ETFs is as simple as buying/selling of any other stock on the exchange allowing investors to take advantage of intra-day price movements. Thus with ETFs, one can benefit both from the flexibility of a stock as well as diversification of an open ended mutual fund scheme.
All ETFs mimic the composition of the index/sectors they track. This is a passive style of investing and hence carries low risk and low costs. Investors can buy shares of an ETF and even trade these through the day, on a stock exchange.