ETF: What Is It? What Are Popular ETFs?
An exchange-traded fund (ETF) is an investment fund that functions similarly to a regular stock, as it can be bought and sold on a stock exchange. ETFs are a collection of securities, including stocks, bonds, commodities, or currencies, which are designed to track a specific index, sector, or asset class. Investing in ETFs offers several advantages, such as low costs, tax efficiency, diversification, and liquidity. If you are interested in learning more about ETFs, today’s article will be pretty useful for you.
ETF types
There are various types of ETFs available:
Index ETFs. These ETFs mirror the performance and returns of a particular market index, such as the S&P 500, Nasdaq 100, or Dow Jones Industrial Average. Index ETFs are popular for passive investing because they require minimal management and have low fees.
Sector and industry ETFs. These ETFs focus on specific sectors or industries within the economy, such as technology, healthcare, energy, or consumer staples. They allow investors to gain exposure to a particular market segment without purchasing individual stocks. Sector and industry ETFs can be beneficial for portfolio diversification or capitalizing on market trends.
Commodity ETFs. These ETFs invest in physical commodities, such as gold, oil, natural gas, or agricultural products. They serve as a hedge against inflation, currency fluctuations, or geopolitical risks. Commodity ETFs can be structured in different ways, including holding the actual commodity, futures or options contracts, or shares of companies involved in commodity production or trading.
Bond ETFs. These ETFs invest in fixed-income securities, such as government, corporate, municipal, or international bonds. They provide investors with a steady income stream and lower risk compared to stocks. Bond ETFs vary based on factors like maturity, credit quality, interest rate, and tax status.
Actively managed ETFs. These ETFs are managed by a fund manager who makes investment decisions based on research, analysis, and market conditions. Their objective is to outperform a benchmark index or achieve specific goals, such as generating income, capital appreciation, or risk reduction. Actively managed ETFs typically have higher fees and turnover compared to index ETFs, but they may also offer higher returns or lower risk.
What are some popular ETFs?
Several ETFs have gained popularity due to their high trading volume, low fees, and strong performance. These ETFs offer investors exposure to various markets, sectors, and strategies.
Please, notice! However popular EFT may be, it is essential to consult with a finance adviser to find out the best EFT that will meet all your personal needs.
Here are some examples of popular ETFs based on the web search results:
| Popular ETFs | Characteristics |
| ProShares UltraPro QQQ (TQQQ) | This leveraged ETF aims to provide three times the daily return of the Nasdaq 100 Index, which comprises the 100 largest non-financial companies listed on the Nasdaq. TQQQ is suited for aggressive investors seeking amplified gains or losses from the technology sector. However, it comes with high risk, volatility, and compounding effects. |
| Vanguard Total International Stock ETF (VXUS) | This broad-based ETF invests in stocks from developed and emerging markets outside the U.S. It covers over 6,000 companies across regions like Europe, Asia, Canada, and Latin America. VXUS is suitable for investors looking to diversify their portfolios and capitalize on global economic growth. However, it carries currency risk, political risk, and regulatory risk. |
| SPDR Gold Shares (GLD) | This commodity ETF tracks the price of gold bullion by holding physical gold in vaults and issuing shares representing fractions of an ounce. GLD is favored by investors seeking to hedge against inflation, currency fluctuations, or geopolitical risks. However, it involves storage costs, tracking errors, and tax implications. |
| iShares Core S&P 500 ETF (IVV) | This index ETF mirrors the performance of the S&P 500 Index, which represents the 500 largest and most widely held U.S. companies across sectors like technology, healthcare, financials, and consumer discretionary. IVV offers low costs, high liquidity, and tax efficiency for investors interested in the U.S. stock market. However, it carries market risk, concentration risk, and replication risk. |
| ARK Innovation ETF (ARKK) | This actively managed ETF invests in companies expected to benefit from disruptive innovation, such as artificial intelligence, biotechnology, fintech, and robotics. ARKK holds approximately 35 to 55 stocks from various sectors, regions, and market caps. It appeals to investors seeking exposure to emerging technologies and trends. However, it involves high fees, high turnover, and high volatility. |
Follow us on Telegram, Instagram, and Facebook to get Headway updates instantly.
