Exchange-traded funds, or ETFs, are funds traded on the stock market that very closely follow an index. We might say that they track the course of the index – they mirror it one for one. One of these indexes could be the DAX, for example, which is formed of the 40 largest companies that you can buy stocks from in Germany. You can imagine ETFs to be bundles of many different stocks or bonds that you invest in at the same time, by simply investing in a single ETF. By investing in many different companies at once, you significantly lower your investment risk because you are spreading your money across many different stocks or bonds. Simply put, you’re not putting all your eggs in one basket.
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