Exchange-Traded Funds (ETFs) are investment instruments that combine features of stocks and mutual funds, as they are traded in financial markets like regular stocks. They provide investors with the ability to diversify and reduce risk by investing in a range of assets such as stocks, bonds, or commodities. Their types vary between index funds that track the performance of a specific index, sector funds that target specific industries, and fixed-income funds that focus on bonds. They are characterized by lower costs compared to mutual funds, transparency, and ease of trading. Investors prefer them for short-term speculation or as a long-term investment for sustainable growth.