ETF vs ETC: what's the difference?
ETFs and ETCs both trade like a share, but one holds companies and the other holds a commodity. Here's the difference and when you'd use each.
ETF — exchange traded fund
An ETF is a basket of investments — often an entire index like the S&P 500 — that trades on the stock market like a single share. Buy one and you instantly own a slice of everything inside it, which gives you diversification at low cost in a single trade. It's the simplest way for most people to own "the market".
ETC — exchange traded commodity
An ETC works the same way — it trades like a share — but instead of holding company stocks, it tracks the price of a physical commodity such as gold, silver or oil. It lets you get exposure to a commodity's price without storing the physical asset yourself.
The key difference
| ETF | ETC | |
|---|---|---|
| Holds | Stocks / bonds | A commodity |
| Gives you | Diversification | Commodity exposure |
| Typical use | Core long-term investing | A hedge or a specific bet |
Which matters for you
For most long-term investors, a broad, low-cost ETF is the workhorse — which is why our homepage calculator uses a Vanguard S&P 500 ETF as its baseline. An ETC is more of a specialist tool: gold as a hedge against uncertainty, or oil as a play on the economic cycle. Both trade as easily as a normal share.
Put this into practice — open the screener →