ETFs (Exchange-Traded Funds) are made up of baskets of assets bundled into one freely negotiable security. Exchange-Traded Funds offer an excellent way to diversify your portfolio and risk profile since ETFs can include hundreds or, in some cases, thousands of underlying instruments. Owning ETFs is a simplified way to speculate on a particular market sector or asset class as there is no need to buy all the assets included in the ETF. Investors buy and sell the fund, mirroring buying and selling the underlying assets.
How to trade ETFs
Exchange-Traded Funds are similar to hedge funds in that they track asset classes or market segments, but the two differ in one very fundamental way. Whereas mutual funds can only be traded at the end of the trading day, ETFs can be bought and sold at any time of the day.
Operating ETFs is a simple procedure as all providers need to do is set up the bundle of assets and offer them to the investing public under a unique ticker symbol. Investors can choose to invest in the particular ETF by purchasing shares in the fund. ETFs can be bought and sold on stock exchanges and are structured to track anything from individual commodities to whole market segments.
Types Of Exchange-Traded Funds
ETFs can track any instrument or market segment snd there are multiple types:
Stock ETFs
Tracking stocks, this type of ETF is aimed at investors with a longer-term investment profile.
Commodity ETFs
Tracking commodities such as energy products, agricultural products, and precious metals.
Industry ETFs
Tracking particular industries such as energy, technology, or financials.
Some examples of ETFs include
Vanguard Total Stock Market Index ETF
Tracks the performance of the CRSP US total market index
ProShares Ultra S&P500; ETF
Tracks the S&P 500, providing a widely diversified portfolio of the biggest U.S corporations with embedded leverage x2.
AdvisorShares Pure Cannabis ETF
Is the first actively managed ETF with a dedicated cannabis investment mandate domiciled in the United States
Vanguard Emerging Markets Stock Index Fund ETF
One of the biggest ETFs tracking the performance of emerging market stocks