An exchange-traded fund (ETF) holds a variety of securities in one category or class. Most ETFs are passively managed, meaning they are designed to track the performance of a particular index. 30-Day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among https://test-alltech-blueprint.pantheonsite.io/2025/09/23/calvenridge-trust-review-2025/ bond funds. This figure reflects the income earned from dividends – excluding option income – during the period after deducting the Fund’s expenses for the period.
Most broad-based ETFs trade within 2% of the fund’s NAV, although this spread could widen in periods of market volatility. The premium or discount could also be more significant for more narrowly focused ETFs. The process all starts with an ETF sponsor, usually a fund manager, who creates an investment management strategy based on studying various securities and their performance. The plan is submitted to the Securities and Exchange Commission (SEC) for approval. ETFs may be appropriate for many kinds of investors, especially the traditional, more broadly diversified and passively managed ETFs that provide exposure to multiple securities and sectors.
Our asset management capabilities include mutual funds, ETFs, SMAs, model portfolios, indexing and insurance solutions, and more. The performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted.
Stay up-to-date with key investment themes
You should carefully review the prospectus for an ETF’s expense ratio. Narrowly focused ETFs — An ETF that’s more narrowly focused is more dependent on a certain kind of company or individual country. Narrowly focused ETFs can also have large allocations to single companies. This can lead to higher volatility over time, with more downside than investors may expect. Broad-based ETFs can be held for a longer term and offer investors more diversification.
Types of exchange-traded funds
This may cause an ETF to trade at a premium or discount to its NAV. Equity ETFs invest in various stock assets, usually tracking stocks in a particular industry or in an entire index of equities, such as the Dow Jones Industrial Average (DJIA) or the S&P 500 Index. Equity ETFs may own stocks, generally selected based on company location, sector or size. When you invest in an ETF, you are joining other investors in pooling your money to invest in multiple securities simultaneously. Each share you purchase gives you a little piece of every security (asset) included in the ETF. ETFs can be used as the building blocks of your portfolio or as a complement to other investments you own, providing further diversification.
- Passively managed ETFs representing a certain asset class tend to be similar, so costs can be an important difference.
- They consist of stocks, bonds, and other asset classes, have low volatility, and can be a source of passive income.
- ETFs also can provide exposure to certain asset classes with a more limited number of fund choices, such as emerging markets or international small-cap.
- There are many ETFs that pay dividends from their holdings of shares, bonds, or property, and thus provide some income.
- An ETF is a basket of securities that can be bought or sold on a stock exchange.
The Distribution Rate is computed as the normalized current distribution (annualized) over NAV per share. In addition to net interest income, distributions may include capital gains and return of capital (ROC). The information on this site does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional/financial consultant before making any investment decisions. An exchange-traded fund (ETF) is a basket of securities you can trade through a brokerage firm on a stock exchange.
ETFs vs. mutual funds: Understand the difference
FBTC, FETH, and FSOL each offer an investment in a single cryptocurrency. These funds are highly volatile and can become illiquid at any time. The price of most ETFs closely reflects the value of the assets they hold. This is in contrast to some products like investment trusts for example – where the trust’s shares frequently trade at a premium or a discount to their assets, which means additional risk. There are many ETFs that pay dividends from their holdings of shares, bonds, or property, and thus provide some income.
Fixed-income ETFs (bond ETFs) invest in bonds, which are fixed-income securities. Most bond ETFs focus on a specific subset of bonds, such as government or corporate bonds, and are generally lower risk, which can help reduce your portfolio’s volatility. Bond ETFs trade throughout the day on a centralized exchange, as opposed to individual bonds, which are sold by bond brokers. In return, as an investor, you will get a share of the fund (based on what you purchase), possibly entitling you to dividend payments, capital gains distributions or other benefits.
As mentioned above, an ETF is an exchange-traded investment fund through which investors can pool their money to invest in a preselected basket of securities. Taxes — Taxes are an important consideration for investments held in taxable accounts. Passively managed investment strategies such as ETFs tend to trade less frequently than mutual funds, leading to less portfolio turnover and lower capital gains. If the potential for greater tax efficiency appeals to you, an ETF may be appropriate.