An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies.
ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.
An ETF is called an exchange traded fund since it's traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close.
An actively managed ETF is a form of exchange-traded fund that has a manager or team making decisions on the underlying portfolio allocation, otherwise not adhering to a passive investment strategy.
An actively managed ETF will have a benchmark index, but managers may change sector allocations, market-time trades, or deviate from the index as they see fit. This produces investment returns that do not perfectly mirror the underlying index.