ETFs are baskets of stocks or bonds that trade like regular stocks. They're usually passively managed, meaning they seek only to match the underlying benchmark index.
What is a leveraged ETF?
A leveraged exchange-traded fund (ETF) is a security that uses financial derivatives and debt to boost the returns of an underlying benchmark index. So while a traditional ETF may track securities of an index on a 1:1 basis, a a leveraged ETF may target a higher mark for a 2:1 or 3:1 ratio.Learn More: What Is a Leveraged ETF?
Are ETFs or mutual funds better for young investors?
Many young or novice investors may have heard about exchange-traded funds (ETFs) or mutual funds and are wondering which may be the better option. Here are some things to keep in mind when deciding between the two investing options. First, typical mutual funds are actively managed rather than passively tracking an index, which can be an advantage. Many mutual funds also may require a minimum investment, but many brokers now offer commission-free ETFs. Generally speaking, ETFs are more tax-efficient and more liquid than mutual funds, which is also something young investors should weigh.
What is an exchange traded product (ETP) ?
Exchange traded products are financial instruments that track a benchmark index or a basket of underlying securities that trade on exchanges similar to stocks and bonds that are bought and sold in the open market. Some popular ones include exchange traded notes, exchange traded funds, and other related products.Learn More: Exchange Traded Product (ETP) Definition
What is a stock exchange traded fund (ETF)?
A stock exchange traded fund is a financial product that tracks a basket of equities, which is an investing option that helps investors diversify their investments in a specific industry or set of companies, limiting the risk of investing in a single stock. Those funds also offer a more cost-effective way to get exposure to a selection of stocks that track a specific index, industry or category of equities.Learn More: Stock Exchange Traded Fund (ETF) Definition
What is a bond ETF?
Similar to a stock ETF, a bond exchange traded fund is a financial product that tracks a basket of debt, which is an investing option that helps investors diversify their investments in a specific industry or set of companies, limiting the risk of investing in a single bond. They can mirror bond mutual funds that have a debt portfolio of various risk profiles, from safer U.S. Treasuries to higher yielding bonds of varying maturities and risk exposure.Learn More: Bond ETF Definition
What is an inverse ETF?
An inverse exchange traded fund is a derivative product that uses securities tied to a benchmark index to profit from a decline in value of the underlying index. Inverse ETFs are also known as short ETFs or bear ETFs since the strategy involved investing on market declines or short positions in order to profit from the strategy. Inverse ETFs typically have higher fees compared to traditional ETFs, and can lead to losses if investors calculate the market direction incorrectly.Learn More: Inverse ETF Definition
An index ETF is a type of exchange-traded fund (ETF) that is designed to mirror a benchmark index, such as the Standard & Poor’s 500 index, the Dow Jones Industrial Average or Nasdaq 100 that trade on an exchange. Index ETFs are popular because they offer a diversified portfolio for investors.
Smart Beta ETF
A smart Beta ETF is a kind of exchange traded fund that follows an index, but it also considers alternative factors in choosing the stocks from the index that include companies that only have certain behaviors or metrics. For example, some of these ETFs may follow a stock index that contains only tech stocks, large companies, or mid-cap stocks.
The original ticker symbol for the Nasdaq 100 Trust is known as QQQQ, an ETF that trades on the Nasdaq exchange. The ETF is known as "cubes" or quadruple-Qs" and offers broad exposure to the tech sector by tracking the Nasdaq 100 Index.
Regulated Investment Company (RIC)
A regulated investment company can be any type of investment such as mutual funds, ETFs, and REITS. A so-called RIC must derive a minimum of 90% of its income from capital gains, interest, or dividends earned on investments. It was created in 2010 under the RIC Modernization Act to address changes in the mutual fund industry, when President Obama signed it into law.
BlackRock, the world's largest asset management company, is the parent of iShares, which is one of the world's largest and well-known ETF providers, offering more than 800 products worldwide. Founded in 2000, iShares now manages over $2 trillion among its exchange-traded funds.
A sector ETF is a financial product that invests in stocks and other securities of a very specific sector such as manufacturing, energy or technology stocks, which allows investors to bet on an entire industry without having risky exposure to a single company or several companies. Some other broad sector categories also may include industrials, utilities, or real estate.
An authorized participant is an organization that has the right to create and redeem shares of an exchange traded fund (ETF). Large banks like Bank of America (BAC), JPMorgan Chase (JPM), Goldman Sachs (GS), and Morgan Stanley (MS) are among some of the most well-known authorized participants.
A dividend ETF is an exchange-traded fund (ETF) designed to invest in a basket of dividend-paying stocks, which is an income-investing strategy that provides income via stocks dividends.