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ETF Education
Our ETF education page is designed to provide you with all the information you need to understand and invest in exchange-traded funds.
What are ETFs?
An ETF (Exchange Traded Fund) is a investment fund that holds assets such as stocks, commodities, or bonds and is traded on a stock exchange.
An ETF (Exchange Traded Fund) is a type of investment vehicle that holds a collection of assets such as stocks, commodities, or bonds. ETFs are traded on stock exchanges and can be bought and sold like individual stocks. They offer investors a convenient, tax efficient and cost-effective way to diversify their portfolio and gain exposure to a wide range of markets and asset classes.
A Popular Investment Vehicle
ETFs have become popular investment vehicles in the US and globally.
$8.3 tr.
Global ETFs AUM
Source: ETFGI, as of Q4 2022
10,000+
ETFs listed globally
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Source: ETFGI, as of Q3 2022
$20 tr.
Projected Global ETFs AUM by 2026
Forecast by: PWC, as of Q2 2022
$6.7 tr.
US-listed ETFs AUM
Source: ETFGI, as of Q4 2022
3,000+
US-listed ETFs
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Source: ETF.com, as of Q4 2022
$13 tr.
Projected US-listed ETFs AUM by 2026
Forecast by: PWC, as of Q2 2022
How ETFs Work
Understanding the process of creating and redeeming ETF shares is important in understanding how ETFs operate. This process plays a key role in minimizing the spread between the ETF price and its net asset value (NAV) and providing a unique source of liquidity and tax efficiency for investors.
Creation Process
Redemption Process
How ETFs are managed?
ETFs can be passively or actively managed. The main difference in practice is the extent of active involvement and discretion that can be applied to managing the portfolio.
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Passive Management
Passive management, also known as index investing, involves tracking a market index, such as the S&P 500, and attempting to replicate its performance.
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Active Management
Active management requires a portfolio manager to actively trade securities based on a process/framework that may also incorporate factor analysis and risk management.
Key Reasons to Consider Active Management
ETFs can be passively or actively managed. The main difference in practice is the extent of active involvement and discretion that can be applied to managing the portfolio.
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Investment Expertise
Investment analysts leverage investing and industry expertise to determine the optimal portfolio allocation for the ETF, incorporating qualitative and quantitative factors.
Security Selection
Discretionary investment management allows for optimizing security selection to fit the investment strategy criteria.
Risk Management
Active management empowers an investor with the flexibility to manage risk carefully and anticipate future challenges.
Shareholder Engagement
Active managers can engage with company management of portfolio positions to drive accountability, unlock value and affect change.
What can you invest in with ETFs?
Some ETFs are designed to provide broad-based exposure to a particular market or sector, while others are more focused on a specific theme or investment strategy.
Equities
ETF that invest in the stocks of companies.
Fixed Income
ETF that invest in bonds, which are debt securities issued by governments, municipalities, and corporations.
Commodities
ETF that provide exposure to commodities, such as gold, oil, or agricultural products.
Real Estate
ETFs that hold real estate investment trusts (REITs) and provide investors with access to a diversified portfolio of properties
Currencies
ETFs that invest in foreign currencies allow investors to gain exposure to the movements of specific currencies, such as the euro or the Japanese yen
Cryptocurrencies
ETFs that track the price of cryptocurrencies such as Bitcoin or Ethereum.
Geographical Group
ETFs that invest in markets that share similar economic status or growth trajectory such as emerging markets
A Country
ETF that invests in the stocks of companies based in a specific country.
A Sector
ETF that invests in the stocks of companies within a specific industry or sector of the economy such as energy or healthcare
A Theme
ETFs that invest in a specific theme or sector, such as renewable energy or reshoring.
Factors
ETF that invest in stocks that exhibit certain characteristics, or "factors," such as value, growth, or dividends
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ESG
ETF that invest in companies that meet certain standards for environmental sustainability, social responsibility, and corporate governance.