A "basket of stocks" refers to a group of stocks that have exactly the same composition and proportions as the index in which the ETF invests. :

ETF is the abbreviation of exchange-traded open-end index fund. It is an open-end fund listed and traded on the exchange with variable fund shares. ETF was first produced in Canada, but its development and maturity mainly occurred in the United States. ETFs generally use passive investment strategies to track a certain underlying market index, so they have the characteristics of index funds.

ETF combines the operating characteristics of closed-end funds and open-end funds. Investors can buy and sell in the secondary market of exchanges like closed-end funds, and can subscribe and redeem like open-end funds. The difference is that its subscription is to exchange a basket of stocks for ETF shares, and when redeemed, it is exchanged for a basket of stocks instead of cash. This trading system enables such funds to have an arbitrage mechanism between the primary and secondary markets, which can effectively prevent large discounts similar to closed-end funds.