What are ETFs designed to do?

Exchange-Traded Funds (ETFs) are primarily designed to track the performance of various asset classes, which may include indices, commodities, bonds, or a diverse mix of other financial securities. This design enables investors to gain exposure to a specific segment of the market without having to purchase each individual asset. By mirroring the performance of these assets, ETFs provide investors with a convenient and relatively low-cost means of achieving diversification in their portfolios.

Many ETFs aim to replicate the performance of a specific index, allowing investors to invest in a broad market experience rather than selecting individual stocks or assets. This facilitates a passive investment strategy where the goal is to match market performance rather than outperforming it through active management, which can involve higher costs and risks.

In contrast, other options such as investing exclusively in governmental securities, facilitating short selling, or serving as a loan provider do not capture the primary function of ETFs, which is to track a wide range of assets rather than limit investment to specific types or functions.