You can see the writing on the wall. You're certain that stocks in the industrials sector are going to start taking off in the next couple of years, and you want to get in now. But then the question arises: Which stocks to buy? Buying shares of an exchange-traded fund gives investors simple, broad exposure to stocks within a certain segment of the market. An ETF might hold Brazilian stocks, for example. A sector ETF holds stocks within a sector (like health care, consumer staples, energy, etc.), giving investors a way to get into the sector without having to put their money on just a few stocks. That might lessen risk, and reward.
Shares of exchange-traded funds can be traded like stocks.