If an index fund and a stock got married and started a family, their children would be ETFs — exchange-traded funds.

ETFs have inherited traits from each parent.

Just like index funds, most ETFs are passively managed, diversified, and low-cost.

And just like stocks, ETFs are bought through a brokerage account and trade on an exchange at any time during the day.

This mash-up of desirable traits has made ETFs increasingly popular investment tools.

There are over 6,000 ETFs on 60 exchanges around the world, with about $3 trillion in assets.

Here's how they work.

Imagine ETFs are baskets.

And this is the important part.

Each basket holds actual securities.

So for example, a bonds basket could be packed with a collection of government or corporate bonds.

A solar stocks basket holds real shares in companies that make solar panels.

There's even a gold basket backed by — you guessed it — gold bars sitting in a vault.

Now, let's say you had $1,000 and you wanted to buy gold.

The problem is, $1,000 isn't going to buy a whole lot of gold — only about an ounce.

And it's really difficult, not to mention risky, to store your own gold.

What would be a lot easier and safer is to invest your $1,000 in a gold ETF.

When you do that, you're not buying the gold itself.

You're buying shares of a big basket of gold — shares that trade, just like stocks.

And those are the two big attractions of ETFs.

You don't need to be wealthy to invest in them, and they are simple to buy, sell, and own.

Another draw — ETFs almost never incur yearly capital gains taxes like mutual funds can.

You'll only pay taxes when you sell your shares in the ETF for a profit.

It's no wonder that ETFs have exploded.

In the U.S. alone, ETFs trade about $20 trillion worth of shares a year, which is more than U.S. GDP.

It seems clear that ETFs are going to be part of the investing universe for many years to come.