Exchange-traded funds (ETFs) explained

Video explainer · Stocks · Summary written by UXS November 10, 2026

Video by Khan Academy on YouTube (5:01, uploaded April 18, 2011). Embedded with the official YouTube player; UXS did not make this video. Watch on YouTube

Our summary

Khan Academy explains where ETFs fit next to traditional funds.

  • Open-end mutual funds grow and shrink by issuing and redeeming shares at the end-of-day net asset value (NAV). The manager has to keep cash for redemptions, and investors can trade only once a day at NAV.
  • Closed-end funds have a fixed number of shares that trade on an exchange, so their price can drift away from the value of the holdings.
  • ETFs combine features of both: shares trade on an exchange throughout the day, while large institutions can create or redeem shares in big blocks, which helps keep the market price close to the value of the underlying assets.

Our take: this mechanism is why spot bitcoin ETFs and gold ETFs can track their asset closely while trading like a stock. Fees and tracking still matter; read bitcoin ETF or buy bitcoin directly?.