Like any other fund, an ETF (Exchange Traded Fund) is a basket of stocks or bonds that can be bought in a single purchase. Many popular ETFs track the performance of well-known indices such as the FTSE 100 or S&P 500. They can also track themes such as clean energy or robotics.

This makes ETFs similar to tracker funds, in that they can both be great ways to get broad exposure to a market through a single investment. ETFs, however, are often seen as a modern version of a tracker fund. Here are the main differences:

Wider choice. From tracking single indexes such as the FTSE 100 to global themes such as clean energy, ETFs offer a wider range of options for investors to choose from.

ETFs are also more transparent so you can always view the underlying investments. Tracker funds, on the other hand, typically only release their holdings monthly.

ETFs trade throughout the day - which means you can invest in and out of them more quickly. This compares to tracker funds which typically only trade once per day, so they take longer to buy and sell. Please note Moneybox does not currently offer live ETF trading.

An ETC (Exchange Traded Commodity) follows the price of commodities such as oil or gold.