ETFs, or exchange traded funds, are a type of investment that allows individuals to trade a basket of assets in a single transaction. Mortgage-backed ETFs are ETFs that track a collection of mortgage-backed securities (MBS). MBS are bonds that are backed by a pool of mortgages. When an individual buys an MBS, they are essentially buying the payments made on a group of mortgages. The value of an MBS is based on the underlying mortgages, and the payments made on those mortgages. ETFs offer investors exposure to MBS without the need to purchase individual securities. ETFs are traded on exchanges, and can be bought and sold throughout the day. ETFs are also relatively low cost, and offer tax advantages — they have become increasingly popular in recent years, as ETFs offer investors exposure to a wide range of assets in a single investment.
