Exchange-traded funds (ETFs) are investment funds that are traded on stock exchanges, similar to individual stocks. They typically hold a diversified portfolio of assets, such as stocks, bonds, or commodities, allowing investors to gain exposure to a wide range of markets without having to buy each asset individually. ETFs are known for their liquidity, meaning they can be bought and sold throughout the trading day at market prices. They often have lower fees compared to mutual funds and can be a cost-effective way for investors to diversify their portfolios while maintaining flexibility in their trading strategies.