combine the broad diversification of conventional index mutual funds with the continual pricing and trading flexibility of individual stocks and bonds generally at a lower cost than conventional funds.
It is a mutual fund you can buy during the day in a brokerage account. Since most ETFs are index funds, they are not actively managed, which means they are cheaper to hold. A typical mutual fund has a cost of 1%-2% whereas an ETF can be as low at .05%-.40%. That 1% can be a good chunk of money over the long run.
You have to have a brokerage account and many ETFs trade for free now. Now, most can’t have a brokerage account in their 401Ks, but setting one up at Vanguard/TRowe Price/Fidelity etc, is pretty easy.
About 5 years ago, there was a fee to buy an ETF so many would buy large chucks at $5,000 a trade or more so the $10 fee would be spread over a larger trade. Now, with free ETF trades, you can almost dollar cost average ETFs.
You can go to Vanguard.com and learn more about ETFs and which trade for free. Some trade for free with X dollars in the account.
It is a great time to consolidate accounts if you have stuff in a few different fund companies.