Just like a mutual fund, an exchange-traded fund (ETF) is a pooled investment vehicle that holds a basket of securities like stocks, bonds, and commodities and trades on the stock exchanges. You can buy and sell an ETF anytime, just like a stock.
Like a mutual fund, it collects money from a variety of investors, appoints management, and calculates its Net Asset Value. An index is the most common target for ETFs. They invest in securities that make up the index in a way that mimics its results.
Read more about ETFs.