What is an ETF?

An ETF is a type of investment instrument that tracks multiple stocks or securities of a particular industry, sector or region.

An ETF is a type of investment instrument that tracks multiple stocks or securities of a particular industry, sector or region.  

Understanding ETFs

Similar to a Mutual Fund, ETFs or exchange-traded funds help you invest in a particular industry, sector, region and more. Unlike Mutual Funds, ETFs can be traded just like stocks at a regular stock exchange.

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Example:
You want to invest into solar energy, but you don't know which solar company you should invest in. In this case you can invest into an ETF that specializes in solar energy. This gives you the ability to invest in a varying number of solar energy companies.

Types

There are different types of ETFs

  • Dividend ETFs
    Own stocks that have a history of paying dividends.
  • Sector ETFs
    Own stocks of a particular sector
  • Regional ETFs
    Own stocks of a particular country or region
  • Market-cap index ETFs
    Select and weight stocks based on the size of each company's market capitalization.
  • Bond ETFs
    Own a portfolio of bonds issued by government treasuries, municipalities, private companies or financial institutions.
  • Commodity ETFs
    Own raw materials such as energy,  agricultural goods and precious metals.
  • Currency ETFs
    Own a single or multiple currencies.

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This information is educational only and not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Information is from sources deemed reliable on the date of publication, but Stock Events does not guarantee its accuracy.

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