Quick Guide to ETFs (In Minutes!) 😮💨
What’s an ETF?
ETFs, or exchange-traded funds, are investment vehicles that trade on exchanges and mirror the performance of a specific index.
They offer exposure to diverse assets like stocks, bonds, commodities, and foreign currencies. They also delve into specific sectors, themes, or geographical regions.
How do ETFs differ from Mutual Funds?
While both are collections of securities, ETFs can be traded throughout the day at varying prices, unlike mutual funds which are traded once daily after the market closes.
Passive vs. Active ETFs: What’s the difference?
Passive ETFs typically track a broad index, whereas active ETFs are curated by managers who make decisions on the securities within the ETF.
Reasons to Consider ETFs:
• Simplicity: They offer an easy route to mirror an index or target a specific market segment.
• Transparency: You can view the securities within each ETF.
• Accessibility: ETFs open doors to markets that might be hard to enter.
• Cost-Effective: Passive ETFs often have lower costs than active ones.
• Flexibility: Being exchange-traded, they can be bought or sold any time.
• Diversity: An ETF can comprise numerous securities, offering wide exposure in a single move.
• Portfolio Building: With ETFs, creating a well-diversified asset portfolio becomes effortless.
Top Equity ETFs to Know:
1. SPDR S&P 500 ETF Trust (SPY) - Valued at $396B
2. iShares Core S&P 500 ETF (IVV) - Valued at $340B
3. Vanguard S&P 500 ETF (VOO) - Valued at $322B
4. Vanguard Total Stock Market ETF (VTI) - Valued at $303B
5. Invesco QQQ Trust Series I (QQQ) - Valued at $199B
The ETF Landscape:
ETFs have revolutionized asset management over the past two decades. By the end of 2022, global ETF assets under management (AUM) touched $11T. Forecasts suggest this number might soar to a staggering $18T by 2026.
ETFs in a nutshell
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