ETFs

An ETF (Exchange-Traded Fund) is a type of investment that lets you buy a "basket" of many different stocks all at once. Instead of trying to pick a single winner, you are buying a tiny slice of hundreds—or even thousands—of companies with one single click.

How an ETF Works

Think of an ETF like a playlist.

Instead of buying one "song" (a single stock like Apple), you buy the "Top 500 Hits" playlist (an S&P 500 ETF).
You own a piece of every company in that playlist.
If one company in the playlist has a bad year, the other hundreds of companies help keep your investment steady.

Why ETFs are a "Cheat Code" for Beginners

Instant Diversification: You don't have to put all your eggs in one basket. One share of an ETF can make you a partial owner of the entire U.S. stock market.
Trade Like a Stock: Unlike some older types of funds, you can buy and sell ETFs anytime the stock market is open, just like a regular stock.
Low Fees: Most ETFs are managed by computers that follow a specific list (an Index). Because there isn't a team of expensive bankers picking the stocks, the fees are incredibly low.
Tax Efficiency: Due to the way they are built, ETFs often trigger fewer taxes for you than other types of funds.

Essential Facts for You and Your Parents

1. The "Ticker Symbol"

Every ETF has a 3 or 4-letter code called a ticker symbol. This is what you and your parent will type into your brokerage app to find it.

Example: VOO is the ticker for a popular ETF that tracks the S&P 500.

2. Expense Ratios (The "Maintenance Fee")

Even though ETFs are cheap, they aren't totally free. Every ETF has an "Expense Ratio." You want to look for one that is very low (usually below 0.10%). This fee is taken out automatically, so you never have to write a check for it.

3. No Minimums (With Fractional Shares)

In 2026, you don't need to save up hundreds of dollars to buy an ETF. Most modern apps allow you to buy Fractional Shares. If an ETF costs $400 but you only have $10, you can buy a $10 "slice" of that ETF.

4. Passive vs. Active ETFs

Passive ETFs: These just follow a list (like an Index). They are very cheap and very popular.
Active ETFs: These have a human manager trying to "beat the market." They are usually more expensive and can be riskier.

Common ETFs to Know

You can find an ETF for almost anything. Here are the most common "buckets" people use:

Total Stock Market: Owns almost every public company in the U.S.
Tech-Focused: Owns companies like Microsoft, Nvidia, and Apple.
Dividend-Focused: Owns stable companies that pay you cash "thank you" checks.

ETFs Examples

Click on the ticker symbol to learn more!

SPY

QQQ

SPY is a basket of the 500 biggest U.S. companies.
Buying SPY lets you own a tiny piece of all of them at once—safe, simple, and great for long-term growth. Click HERE to learn more.

QQQ is a big basket of the top 100 technology companies in the U.S. Buying QQQ means you own a tiny piece of companies like Apple, Microsoft, NVIDIA, Amazon, Google, and Meta. Click HERE to learn more.

FAQs

No. Minors cannot legally sign binding financial contracts, so an adult must open and manage the account for them. The account is opened in the child’s name but controlled by the adult (called the custodian) until the child becomes an adult.
A custodial account is an investment account set up by an adult for a minor under laws like the UGMA or UTMA. The adult manages the money and investments, but everything legally belongs to the child. When the child reaches the age of majority (18 or 21, depending on the state), they take full control of the account.
- UGMA (Uniform Gifts to Minors Act) accounts can hold only financial assets such as stocks, ETFs, mutual funds, and cash.
- UTMA (Uniform Transfers to Minors Act) accounts can hold all of the above plus other assets like real estate or property, depending on the state.
  UTMA is available in most states and is slightly more flexible.
You’ll need personal information for both the adult and the child, including names, Social Security numbers, and birthdates. The custodian also needs to provide a valid ID. Most brokerages let you open the account online in just a few minutes.
The child is the account owner, so they are technically responsible for taxes on earnings. However, the IRS applies special “kiddie tax” rules: small amounts are taxed at the child’s rate, but beyond a certain threshold, extra income is taxed at the parent’s rate.
There are no contribution limits like with retirement accounts, but large gifts may trigger gift-tax reporting. In 2025, you can give up to $18,000 per year per child without needing to file a gift-tax return.
Yes, but any withdrawals must be for the child’s direct benefit — for example, education, extracurricular activities, or other legitimate expenses that help the child.
When the child reaches the legal age of majority in your state, the account automatically transfers to them. They gain full control over the assets and can decide what to do with the money.
Yes, it can. Because the account belongs to the child, it’s considered the child’s asset on the FAFSA form. That means it can slightly reduce eligibility for need-based financial aid compared to assets owned by the parent.
A 529 plan is designed specifically for education and offers tax-free growth for qualified school expenses. A custodial account is more flexible — you can invest for any purpose — but it doesn’t have the same tax benefits for education.
Yes, you can open more than one account (for example, one at Fidelity and another at Vanguard), but it’s often easier to manage everything in one place to simplify taxes and record-keeping.
Item description