Meaning, ETFs don’t try to “beat” the market, they try to “be” the market.
When you buy a share of an ETF, it represents a portion of all of the fund’s underlying investments. This enables you to diversify across a predetermined basket of stocks or bonds through one single fund—providing access to the stock or bond market without having to make individual purchases.
Most ETFs function like an index fund. For example, if you were to purchase an S&P 500 Index ETF, that ETF would own all 500 stocks listed in the S&P 500 Index.1 It will not trade in and out of those stocks. It will simply own the stocks listed in that index. By buying a share of the ETF, your money is instantly diversified across all of the underlying securities.
1. The S&P 500 Index is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe.