WHAT IS AN ETF?
Exchange-traded-funds, or ETFs, are similar to mutual funds in that they invest in a basket of securities, such as stocks, bonds, or other asset classes. But unlike mutual funds and similar to a stock, ETFs can be traded whenever the markets are open.
By combining the diversification benefits of mutual funds with the ease of stock trading, ETFs are able to provide investors with a simple way to access the world’s financial markets.
TYPES OF ETFs
Exchange traded funds may trade like stocks, but under the hood they more resemble mutual funds, which can vary greatly in terms of their underlying assets and investment goals. Below are a few common types of ETFs — just note that these categories aren’t mutually exclusive. For example, a stock ETF might also be index-based, and vice versa. These ETFs aren’t categorized by management type (passive or active), but rather by the types of investments held within the ETF.
• ACTIVE VS INDEX ETFs
• STOCK ETFs
• BOND ETFs
• COMMODITY ETFs
• INTERNATIONAL ETFs
• SECTOR ETFs
BENEFITS OF ETFs
Understanding the potential benefits of ETFs is an important step toward determining whether ETFs can be an appropriate choice for your portfolio.
• TARGETED EXPOSURE
• LOW COST
• DIVERSIFICATION
• LIQUIDITY
• TAX EFFICIENCY
• TRANSPARENCY
