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| Meta Title | ETFs |
| Meta Description | ETFs are baskets of stocks or bonds that trade like regular stocks, which are usually passively managed, meaning they seek only to match the underlying benchmark index. Browse Investopedia’s expert-written library to learn more. |
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| Boilerpipe Text | Unlock a Worry-Free Retirement With ETFs
Frequently Asked Questions
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.
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.
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.
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.
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.
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.
Cryptocurrency Exchange-Traded Funds (ETFs) track the price performance of cryptocurrencies by investing in a portfolio linked to their instruments. Like other such funds, crypto ETFs trade on regular stock exchanges, and investors can hold them in their standard brokerage accounts.
Key Terms
Index ETF
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.
QQQQ
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.
iShares
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.
Sector ETF
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.
Authorized Participant
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.
Dividend ETF
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. |
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# ETFs
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.
[![Toolbox containing items representing financial investment concepts, such as graphs, pie chart, and money symbols.]() :max_bytes\(150000\):strip_icc\(\)/10_Using_ETFS-9e78a32df7a140659348252129aadad3.jpg) Unlock a Worry-Free Retirement With ETFs](https://www.investopedia.com/etfs-reliable-retirement-income-source-11741769)
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[![Two professionals in a discussion at a table with a laptop in an office setting]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1330558514-b4f14473075f446f8fe9cadca7529001.jpg) Index Fund vs. ETF: Key Differences Explained](https://www.investopedia.com/ask/answers/033015/whats-difference-between-index-fund-and-etf.asp)
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[![Illustration of two piggy banks with arrows between them accompanied by text explaining ETFs: An echange-traded fund (EFT is a type of pooled investment security that holds multiple underlying assets, rather than only one.]() :max_bytes\(150000\):strip_icc\(\)/EFT_final-45a9ca8cf7e948608a3b8dae38b66393.png) Exchange-Traded Fund (ETF): What It Is and How to Invest](https://www.investopedia.com/terms/e/etf.asp)
## Frequently Asked Questions
- 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?](https://www.investopedia.com/terms/l/leveraged-etf.asp)
- 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.
Learn More: [ETFs vs. Mutual Funds: Which Is Better for Young Investors?](https://www.investopedia.com/articles/investing/021916/etfs-vs-mutual-funds-which-better-young-investors.asp)
- 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](https://www.investopedia.com/terms/e/exchange-traded-products-etp.asp)
- 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](https://www.investopedia.com/terms/s/stock-etf.asp)
- 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](https://www.investopedia.com/terms/b/bond-etf.asp)
- 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](https://www.investopedia.com/terms/i/inverse-etf.asp)
- What is a Cryptocurrency ETF?
Cryptocurrency Exchange-Traded Funds (ETFs) track the price performance of cryptocurrencies by investing in a portfolio linked to their instruments. Like other such funds, crypto ETFs trade on regular stock exchanges, and investors can hold them in their standard brokerage accounts.
Learn More: [How Do Cryptocurrency ETFs Work?](https://www.investopedia.com/investing/understanding-cryptocurrency-etfs)
### Key Terms
Index ETF
Smart Beta ETF
QQQQ
Regulated Investment Company (RIC)
iShares
Sector ETF
Authorized Participant
Dividend ETF
- Index ETF
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.
[Learn More](https://www.investopedia.com/terms/i/index-etf.asp)
- 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.
[Learn More](https://www.investopedia.com/terms/s/smart-beta-etf.asp)
- QQQQ
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.
[Learn More](https://www.investopedia.com/terms/q/qqq.asp)
- 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.
[Learn More](https://www.investopedia.com/terms/r/ric.asp)
- iShares
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.
[Learn More](https://www.investopedia.com/terms/i/ishares.asp)
- Sector ETF
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.
[Learn More](https://www.investopedia.com/terms/s/sector-etf.asp)
- Authorized Participant
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.
[Learn More](https://www.investopedia.com/terms/a/authorizedparticipant.asp)
- Dividend ETF
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.
[Learn More](https://www.investopedia.com/terms/d/dividend-etf.asp)
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[![Person holding a tablet displaying a stock trading app interface]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2205618145-0c718e5623a94057912c042ec971d5be.jpg) Want Bigger Gains? These 4 Aggressive ETF Plays Could Deliver](https://www.investopedia.com/aggressive-etf-plays-11798048)
[![Two professionals walking and conversing while holding coffee cups American flags and a building facade in the background]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1767347751-9892d18a263245daa6cbe258b6c652d6.jpg) Avoid ETF Money Traps: Identifying Profitable and Reliable Funds](https://www.investopedia.com/are-etfs-money-traps-11760686)
[![Bill Ackman, chief executive officer of Pershing Square Capital Management LP, speaks during the WSJ D.Live global technology conference in Laguna Beach, California, U.S., on Tuesday, Oct. 17, 2017. ]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-862490824-fca9b4c48af44fd090bc14640ad0671c.jpg) ETFs Are Copying the Trades of Famous Investors Like Warren Buffett and Bill Ackman—But Are They Worth It?](https://www.investopedia.com/are-copycat-etfs-a-winning-strategy-11756837)
[![Eyeing gold? A comparison of the prospects of the Market Vectors Gold Miners and Market Vectors Junior Gold Miners ETFs. ]() :max_bytes\(150000\):strip_icc\(\)/thinkstockphotos-461251551-5bfc34fe46e0fb00517daf60.jpg) 5 Essential Factors to Consider Before Investing in Gold ETFs](https://www.investopedia.com/considering-gold-etfs-after-recent-record-highs-here-are-5-key-factors-to-weigh-before-investing-11862975)
### Explore ETFs
[All](https://www.investopedia.com/etfs-4427784) [Top ETFs](https://www.investopedia.com/etfs-4427784)
[![A person holding a pen and working with financial documents and a calculator on a table]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2067714497-19006575481a467b9e289bcb32b92c0b.jpg) Outperform Wall Street with Low-Cost S\&P 500 ETFs](https://www.investopedia.com/etfs-that-outperform-private-equity-11754858)
[![A person using a slot machine, seated in a gaming area with visible machines and bright lights]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2202428695-8c06b06f153d408fa7bc5db1de5887aa.jpg) How to Make Money From the Gambling Industry Without Betting](https://www.investopedia.com/gambling-etfs-without-betting-11747588)
[![Nancy Pelosi speaking, holding a gavel]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2101912703-6d4795479c7946db83031710daf76cc1.jpg) Could Trading Like a Member of Congress Be Your Next Big Investment Strategy?](https://www.investopedia.com/how-to-invest-like-congress-11753159)
[![A woman smiling while looking at a transparent digital interface displaying financial data and charts]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2204238294-de6b82b31c1e48b1a528fad36de90ec4.jpg) Earn Monthly Income With ETFs—No Options Knowledge Needed](https://www.investopedia.com/generate-monthly-income-with-etfs-11740061)
[![Warren Buffett, chairman of Berkshire Hathaway Inc., left, speaks to David Rubenstein, co-founder and managing director of the Carlyle Group, during the Economic Club of Washington dinner event in Washington, D.C., U.S., on Tuesday, June 5, 2012.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-145775965-77b249cc03f44a908c4e478acaadcfaa.jpg) Invest Like Buffett: Maximize Income With VistaShares' New ETF](https://www.investopedia.com/an-etf-that-will-invest-like-warren-buffett-11729663)
[![A person at a desk looks flummoxed looking at a tax bill.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-96783877-9c9dea8b57f34791a5a672aca0eb7d24.jpg) Didn't Buy or Sell Any Stocks This Year? Here's Why You Might Still Face a Big Tax Bill](https://www.investopedia.com/hidden-taxes-lurking-in-unsold-investments-11704848)
[![Two people smiles as they look at their ETF returns.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1500845589-9354fc6166c6421f805e9c00863b992f.jpg) ETFs are Booming—Here's What It Means for Your Retirement Plans](https://www.investopedia.com/etfs-and-your-retirement-plans-8782222)
[![A magnifying glass over small wood depictions of homes.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1216178346-282d5b05ae9548cf83708b210cb432e1.jpg) Discover 5 Essential Insights About REIT ETFs for Investors](https://www.investopedia.com/5-surprising-facts-about-reit-etfs-8754940)
[![Blackrock iShares Bitcoin Trust ETF (IBIT) signage at the Nasdaq]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1917868586-d64880817bca4098bc8be36bbd17a4e9.jpg) Should You Trade Options on Spot Bitcoin ETFs?](https://www.investopedia.com/options-on-spot-bitcoin-etfs-8741250)
[![The logo of the American S\&P 500 index and a candlestick chart can be seen in Trading View on the monitor of a computer in an office.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1241275455-3a8806c4833a4078b415c3fbcd2cd91d.jpg) Invest \$50 Monthly in an S\&P 500 ETF: Potential 20-Year Gains](https://www.investopedia.com/invest-50-dollars-sp500-etf-8730276)
[![Financial advisor discussing investments with clients]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1758688766-7d99fc33a7494c208b399026b6e6b67c.jpg) Exchange-Traded Product (ETP) vs. Exchange-Traded Fund (ETF): What’s the Difference?](https://www.investopedia.com/etp-vs-etf-what-is-the-difference-8557256)
[![U.K. Palace of Westminster]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-580699803-1deaa77412e0432bb0580f71f5f62bb9.jpg) U.K. Equity ETFs: What They Are and What You Need to Know](https://www.investopedia.com/uk-etfs-how-they-work-8549739)
[![Dow Jones BRIC 50 Index]() :max_bytes\(150000\):strip_icc\(\)/TermDefinitions_dowjones_bric50_index-69f3e5e513074a798aecffc8d399b05c.jpg) Pros and Cons of BRICS ETFs](https://www.investopedia.com/brics-etfs-pros-and-cons-8548466)
[![Aerial shot of a dam]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-159666283-5cd4cdcfdc7a466f83856f4e9ef4e4f7.jpg) Water ETFs: What They Are and How They Work](https://www.investopedia.com/water-etfs-how-they-work-8426968)
[![Precious Metals ETFs: An ETF that holds assets like gold, silver, and platinum and sell shares in their portfolios.]() :max_bytes\(150000\):strip_icc\(\)/precious-metals-etfs-8549823-final-343cc42eb18447bb9a4d08706e894e33.png) Precious Metals ETFs: What They Are and How They Work](https://www.investopedia.com/precious-metals-etfs-8549823)
[![Treasury ETF: An ETF that holds baskets of US Treasury securities, each with different yields, durations, and interest payments in their portfolios.]() :max_bytes\(150000\):strip_icc\(\)/treasury-exchange-traded-funds-8536147-final-7e6c3e51d4e24d61a0a08e61fad3ea09.png) Treasury ETFs: What They Are and How They Work](https://www.investopedia.com/treasury-exchange-traded-funds-8536147)
[![A farmer in a field with a laptop]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-583639930-db2b154a898344bb878e25861f877eda.jpg) Agricultural ETFs: What You Need to Know](https://www.investopedia.com/agricultural-etfs-8425680)
[![Bull and bear in front of Exchange Square in Hong Kong]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1240268866-06d540fa01154def8bc605142c0496b1.jpg) Hong Kong ETFs: What They Are and How They Work](https://www.investopedia.com/hong-kong-etf-8432004)
[![Young man sitting before a computer monitor showing a map of the world]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1323108614-b7d0dbc65ce144baa06cbfb662ba8363.jpg) How to Invest Globally Through ETFs](https://www.investopedia.com/how-to-invest-globally-through-etfs-8431212)
[![Woman holding a Brazil flag]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1504472959-5cd5c52d062f4409ae0abd81294737e5.jpg) Brazil ETFs: What They Are and How They Work](https://www.investopedia.com/brazil-etfs-how-they-work-8425617)
[![Worker loading gold bars onto a trolley]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1236796274-334b7c2b0427465c8bfb712d1630c8df.jpg) Gold ETFs and Gold Mining ETFs: What They Are and How They Work](https://www.investopedia.com/gold-and-gold-mining-etfs-8431193)
[![Workers in a factory crafting platinum]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1248854969-0d782dc1a45d44bfbeedcdb0d6381363.jpg) Platinum ETFs: What They Are and How They Work](https://www.investopedia.com/platinum-etfs-how-they-work-8426153)
[![Young woman looking at a document and holding a calculator]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1489926604-2ba09af7a36d4eaf846309ed7d2006b6.jpg) ETF vs. Investment Trust: What’s the Difference?](https://www.investopedia.com/etf-vs-investment-trust-8386101)
[![Ethereum displayed on a mobile phone in someone's hand. ]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1247375783-7c94dca1fbcf4d0cb6c849b450cfbff3.jpg) How an Ether Futures ETF Works](https://www.investopedia.com/how-an-ether-futures-etf-works-8360797)
[![Ether Futures ETF: An investment vehicle that enables exposure to ether through futures contracts.]() :max_bytes\(150000\):strip_icc\(\)/Ether-futures-etf-definition-8363103_final-f729fa7b1e9847dead9d9549c4c6f6b0.png) How Do Ether Futures ETFs Work? Functionality and Investment Tips](https://www.investopedia.com/ether-futures-etf-definition-8363103)
[![Crypto currency scattered around an image.]() :max_bytes\(150000\):strip_icc\(\)/Pros-and-cons-of-crypto-etfs-8362499-e85d2852ed624cdba4dc55e2538f66a0.jpg) Exploring the Pros and Cons of Investing in Crypto ETFs](https://www.investopedia.com/pros-and-cons-of-crypto-etfs-8362499)
[![Woman talking on her mobile phone while looking at charts on her monitor.]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1351452904-6e2069676e424fc58f8249148fe50411.jpg) What Is the Grayscale Bitcoin Trust ETF?](https://www.investopedia.com/news/why-buy-expensive-bitcoin-etf-instead-actual-bitcoin/)
[![Mother reading a card to daughter]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1695569672-9d2e497cf56c4b0ab1d8dfe693237882.jpg) How To Give an Exchange-Traded Fund (ETF) as a Gift](https://www.investopedia.com/how-to-give-an-exchange-traded-fund-etf-gift-6740462)
[![Colorful stock market quotes display reflected on glass]() :max_bytes\(150000\):strip_icc\(\)/WhatAreIndexETFsSept.8.2021-cb62c147b2c04881983630d7f68d0f01.jpg) Understanding Single-Stock ETFs: Risks & Benefits Explored](https://www.investopedia.com/single-stock-etf-5667162)
[![A person sits at a table to balance their checking and savings account. ]() :max_bytes\(150000\):strip_icc\(\)/thinkstockphotos-200171422-001-5bfc2b4b46e0fb0026015ff2.jpg) Put \$10,000 in the S\&P 500 ETF and Wait 25 Years](https://www.investopedia.com/articles/personal-finance/022216/put-10000-sp-500-etf-and-wait-20-years.asp)
[![Man sitting in a cafe with a laptop]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1396592008-8c0c221ce44a449996e0318c3d7639d1.jpg) Top 10 ETF Risks Investors Must Know](https://www.investopedia.com/articles/mutualfund/07/etf_downside.asp)
[![A pair of hands placing a coin on a surface with a surrounding graph and colorful symbols relating to finance.]() :max_bytes\(150000\):strip_icc\(\)/1_HowToInvestintheSP500_Recirc_final-3a23b770acbd402d8f2c37dd2a4fda3d.png) How to Start Investing in the S\&P 500 Today](https://www.investopedia.com/ask/answers/how-can-i-buy-sp-500-fund/)
[![Vanguard Group, Chief Investment Officer Greg Davis]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1241621340-ac0d9cac1f2840078a7c56d33c22dc99.jpg) Who Owns the Vanguard Group?](https://www.investopedia.com/articles/investing/110515/who-are-owners-vanguard-group.asp)
[![Closeup of a winning blackjack hand and piles of chips]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-102284502-5b2192171d64040037c9ba68-96ff32bea2de48cdaa45e56951189834.jpg) 3 ETFs to Invest in the Gambling Industry](https://www.investopedia.com/best-gambling-etfs-5216110)
[![Midsection Businessmen Analyzing Charts on Laptop in Office]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1128046391-8178161e3e184ccab8505fe7a6722cbc.jpg) ETFs vs. Index Mutual Funds: What's the Difference?](https://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp)
[![]() :max_bytes\(150000\):strip_icc\(\)/e014087-5bfc2b95c9e77c005143f248.jpg) Regulated Investment Companies (RICs): Definition, Taxes & Examples](https://www.investopedia.com/terms/r/ric.asp)
[![Man sitting at a table looking at a document and tapping on a laptop]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1444934349-3c1d5dc298284ebbb407a4f5773baa8c.jpg) What Are ETFs? Understanding Exchange-Traded Funds and Their Benefits](https://www.investopedia.com/articles/01/082901.asp)
[![]() :max_bytes\(150000\):strip_icc\(\)/155571944-5bfc2b9646e0fb005144dd3f.jpg) A Complete Guide to Understanding ETF Benefits and Risks](https://www.investopedia.com/articles/exchangetradedfunds/11/advantages-disadvantages-etfs.asp)
[![Couple talking to their financial advisor]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-121601981-db30e895b6d54394acc636d4e57e8b3b.jpg) The Advantages of Investing in ETFs: A Comprehensive Guide](https://www.investopedia.com/ask/answers/09/etfs-vs-mutual-funds.asp)
[![Tracking Error: The difference between the performance of an investment and its benchmark.]() :max_bytes\(150000\):strip_icc\(\)/trackingerror.asp-final-9f4b41b5cf5a477ca6b0853a3af04ff8.png) Understanding Tracking Error: Meaning, Influencing Factors, and Example](https://www.investopedia.com/terms/t/trackingerror.asp)
[![Road signs for different investments over a newspaper]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-10725852341-9dc2cae0f03244c78e7b91899301ec3d.jpg) Building an All-ETF Portfolio](https://www.investopedia.com/articles/exchangetradedfunds/11/building-an-etf-portfolio.asp)
[![Abstract mirror building texture]() :max_bytes\(150000\):strip_icc\(\)/abstract-mirror-building-texture-1027237872-6662c7a1ea5147d7b5cc00bbe0c141fd.jpg) Dissecting Leveraged ETF Returns: Explanation, Components, and Examples](https://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp)
[![]() :max_bytes\(150000\):strip_icc\(\)/volatility_vix_shutterstock_187920503-5bfc2f83c9e77c005180852b.jpg) How To Use a VIX ETF in Your Portfolio](https://www.investopedia.com/investing/use-vix-etf-in-your-portfolio/)
[![Leveraged ETF: A security that uses financial derivatives and debt to amplify the returns of an underlying index or other assets it tracks.]() :max_bytes\(150000\):strip_icc\(\)/Leveraged-etf_final-ae26f0241574443cb9a81ab9e6819834.png) Leveraged ETFs: The Potential for Big Gains—and Bigger Losses](https://www.investopedia.com/terms/l/leveraged-etf.asp)
[![Trader looking down at his tablet]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-2176503212-dd412f8905694f41959b2e0fea17d5ff.jpg) How Are ETF Fees Deducted?](https://www.investopedia.com/ask/answers/071816/how-are-etf-fees-deducted.asp)
[![Woman sitting on a sofa writing in front of an open laptop]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1298373292-ab9d97b5fb144d0cac90ca51c419f24d.jpg) How to Choose an ETF](https://www.investopedia.com/articles/exchangetradedfunds/08/etf-choose-best.asp)
[![Business Chart Showing Financial Success at the Stock Market]() :max_bytes\(150000\):strip_icc\(\)/bonds-lrg-3-5bfc2b23c9e77c00519a93a4.jpg) Understanding Target-Date Funds: Benefits and Drawbacks](https://www.investopedia.com/articles/retirement/07/life_cycle.asp)
[![Person using a laptop, surrounded by abstract shapes and symbols like question marks and exclamation points to illustrate thinking about an investment decision.]() :max_bytes\(150000\):strip_icc\(\)/4_HowtoChooseanSP500ETF_final-9a382f885bf44e93bd6bca1013b62e55.png) How To Choose an S\&P 500 ETF](https://www.investopedia.com/articles/investing/090414/sp-500-etfs-what-every-investor-should-know.asp)
[![A person with a pen is pointing at a volatility chart.]() :max_bytes\(150000\):strip_icc\(\)/What-Is-Volatility-56a093ca3df78cafdaa2db8b.jpg) What Is a Leveraged Volatility ETF?](https://www.investopedia.com/leveraged-volatility-etf-11714205)
[![Chief Investment Officer of ETF and Index Investments at Blackrock rings the opening bell as Bitcoin Spot ETFs are launched on the Nasdaq Exchange on Jan. 11, 2024 in New York City. ]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1917736185-bd5482f8e514472ab5e1a196ad06f04e.jpg) Crypto ETFs Are Getting Cheaper—Here's What It Means for Your 401(K)](https://www.investopedia.com/crypto-etfs-are-getting-cheaper-8774912)
[![A close-up of a mobile device showing a trading screen with Ethereum]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1241445458-47285cf8951a41438b390c837dde723e.jpg) Spot Ether ETFs: A Comprehensive Guide](https://www.investopedia.com/understanding-spot-ethereum-etfs-8622726)
[![U.S. Federal Reserve Chair Jerome Powell at podium ]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1774251896-d9ed5cc6bb4d44eb93022e867c26fe39.jpg) TIPS ETFs: What They Are and How They Work](https://www.investopedia.com/tips-etfs-how-they-work-8424502)
[![Spot Bitcoin ETF: An investment vehicle that allows ordinary investors exposure to the price moves of bitcoin in their regular brokerage accounts.]() :max_bytes\(150000\):strip_icc\(\)/Spot-bitcoin-etfs-8358373_final-32a4e2794ec84896bd0dd7df8f933c62.png) Spot Bitcoin ETFs: Everything You Need to Know](https://www.investopedia.com/spot-bitcoin-etfs-8358373)
[![Man with his face in his hands as price of investment declines]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1393087427-8ead2c9d9456425cb42bec6d01d0f841.jpg) Bond ETFs: Causes of Losses and How to Manage Risks](https://www.investopedia.com/why-bond-etfs-go-down-8303231)
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[![Businessman reading financial stock market analysis]() :max_bytes\(150000\):strip_icc\(\)/Primary-Image-how-to-buy-fractional-shares-on-webull-7499351-42d9405110714d1cb5de848ffe68fd5d.jpg) How to Buy Fractional Shares on Webull](https://www.investopedia.com/how-to-buy-fractional-shares-on-webull-7499351)
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[![Business man trader investor analyst using mobile phone app and laptop]() :max_bytes\(150000\):strip_icc\(\)/Primary-Image-how-to-invest-in-commodities-7480946-604a7bbb3a9a4273af6b8db20586981a.jpg) Effective Strategies for Investing in Commodities](https://www.investopedia.com/how-to-invest-in-commodities-7480946)
[![Woman using smartphone to trade fractional shares at a coffee shop]() :max_bytes\(150000\):strip_icc\(\)/Primary-Image-how-to-buy-fractional-shares-7482606-139e9199be8e4f43b8c197f29e24d397.jpg) How to Buy Fractional Shares](https://www.investopedia.com/how-to-buy-fractional-shares-7482606)
[![Over the shoulder view of Asian woman holding smartphone, analyzing investment trading data on crypto graph with smartphone and laptop while working at home. Cryptocurrency, bitcoin, digital ledger]() :max_bytes\(150000\):strip_icc\(\)/GettyImages-1370827731-8629ef54007a4e219cd6a3b133ab6c9b.jpg) How to Automate Your Investing](https://www.investopedia.com/how-to-automate-your-investing-7378239)
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## Frequently Asked Questions
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Cryptocurrency Exchange-Traded Funds (ETFs) track the price performance of cryptocurrencies by investing in a portfolio linked to their instruments. Like other such funds, crypto ETFs trade on regular stock exchanges, and investors can hold them in their standard brokerage accounts.
### Key Terms
- Index ETF
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.
- QQQQ
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.
- iShares
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.
- Sector ETF
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.
- Authorized Participant
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.
- Dividend ETF
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. |
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