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Exchange traded funds (ETFs) are funds that are listed and traded like a stock on an official exchange such as the New York Stock Exchange. You can buy or sell ETFs exactly the same way as you would buy or sell any other stock listed on that same exchange. You pay a commission to a broker when you buy or sell an ETF. You can keep commissions low by using a discount broker. Please take care not to buy ETFs in small quantities (of less than, say, $1000), since the minimum commission charged by a broker will make the transaction costs high relative to your investment.

ETFs are similar to index funds in two major ways. First, both charge small management fees for managing assets. Second, ETFs and index funds allow you to "buy" into the stock market. ETFs invest all their assets in stocks that make up the stock market (or another index of stocks). For example, the so-called "Spiders" (a nickname derived from its trading symbol SPY) are shares of an exchange traded fund that copies the movements of the S&P 500 stocks. The reason the "Spiders" copy the S&P is that all the assets this ETF will hold are invested in all stocks that make up the S&P 500 stock index. This allows you to "buy" the stock market, or a portion of the largest 500 stocks listed in the US.