What is an ETF? Fund shares and exchange prices

An ETF, or exchange-traded fund, is an investment fund whose shares trade on an exchange. Shares provide exposure to its portfolio. Their market price can differ from the net asset value represented by each share.

Why can the share price differ from NAV?

An investment fund’s assets and expenses determine its net asset value. Exchange orders establish the price at which shares trade. Investor.gov’s ETF explanation describes premiums and discounts to NAV. The ETF label alone does not establish that a portfolio is low-risk or passively managed.

Example

Assume a hypothetical ETF has a NAV of $100 per share but trades at $101. Alex pays $1,010 for ten shares before commission; their represented net assets are $1,000. If the 1% premium disappears, Alex can lose money even without a change in the underlying portfolio. These numbers illustrate pricing, not an actual product quote.

What about crypto ETFs?

US commodity trusts commonly called spot Bitcoin ETFs do not have the same legal structure as conventional registered investment funds. Exchange-traded products (ETPs) form the broader category. Read the scope of an SEC filing or decision alongside the prospectus; using ETF in a name does not make every product’s protections identical.