How do ETFs work?
ETFs pool assets into a portfolio and issue shares that trade on an exchange, with a creation/redemption process helping keep prices near NAV.
February 17, 2026
An ETF holds a portfolio of assets and issues shares that investors trade on an exchange. The ETF's market price moves throughout the day based on supply and demand.
A key part of the ETF system is the creation/redemption mechanism, where large institutions can swap baskets of securities for ETF shares (and vice versa). That process helps keep the ETF's price close to the value of its underlying holdings.
For individual investors, the practical takeaway is simple: choose ETFs based on holdings, fees, and fit with your plan, and place trades thoughtfully (especially if spreads are wide).
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