Translation: Exchange-Traded Funds (ETFs) = exchange-traded funds.

Simple definition: A fund allows investors to invest in several companies or assets by purchasing a single unit, rather than buying each asset separately. It may track an entire market or a specific sector, such as technology or energy.

How do they work? A fund typically tracks a specific index and invests in the assets that make up that index. Its unit price changes according to the performance of those assets, as well as supply and demand in the market. Investors can buy and sell units during trading hours through their investment account.

Practical example: The Invesco QQQ fund, traded under the symbol QQQ, is an example of an exchange-traded fund. It tracks the performance of the Nasdaq-100 Index, which includes the largest non-financial companies listed on Nasdaq.

The fund holds 103 investment assets, and its assets under management are approximately $496.10 billion.

What does this mean for you as an investor?

  • Diversification: The investment is spread across a number of companies instead of relying on a single company.
  • Ease of trading: Units can be bought and sold during trading hours.
  • Liquidity: Higher trading volume helps facilitate buying and selling.
  • Fees: There are fund management fees, in addition to trading commissions.
  • Risks: The fund is affected by movements in the U.S. market and the performance of the companies included in the index.

Frequently asked question: Is investing in QQQ less risky than buying a single stock?

Answer: It is generally more diversified because it includes a group of companies, but it is not risk-free, and its value may decline when the market or the companies it tracks perform poorly.