What is the primary purpose of ETFs tracking an index?

• A. Provide broad exposure with a single trade
• B. Focus on high-risk speculative bets
• C. Guarantee returns
• D. Avoid investment risk completely

Answer: (A)

Index-tracking ETFs are designed to give you broad market exposure in a single trade by mirroring a benchmark index. They achieve this by holding the same or a representative set of securities as the index, so buying one ETF provides you with a diversified portfolio that tracks the index’s performance. This setup also typically comes with lower costs and the convenience of trading like a stock, so you can enter or exit a broad market position with one transaction.

Keep in mind that while they aim to track the index, they don’t guarantee returns, and they cannot eliminate investment risk—the value will still move with the overall market.