What is an ETF and how do index funds track markets?

ETF stands for Exchange Traded Fund. It’s a fund you can buy and sell on the stock market like a normal share. Inside is a basket of investments (often many different company shares or bonds). Most ETFs aim to copy a market index, think of an index as a list, like “the biggest 100 companies.” You can trade an ETF whenever the market is open.

Index mutual funds try to copy an index too, but they’re priced once per day after the market closes. ETFs update in real time during the day, helped by professional market makers who keep trading flowing. 

Some ETFs pay out dividends as cash (distributing); others reinvest them automatically (accumulating), you can find an explanation od dividends here: Dividends in practice