Investing in Exchange-Traded Funds
An exchange-traded fund (ETF) is a type of index fund that is traded on the exchange like a stock. The chart shows the growth in popularity of ETFs - introduced in 1993, there are currently more than 600 ETFs with a total market capitalization of more than $600 billion.
While there is an increasing variety of ETFs, most track indices. Some of the most well-known track indices like the S&P 500 Index, Dow Jones Industrial Average, and the NASDAQ 100. For many of these ETFs, the objective is to match the performance of the index it tracks. This can translate into less portfolio turnover and required management of the fund. This may benefit ETF investors in the following ways:
- Lower management fees
- Potentially lower tax liability resulting from the smaller or fewer taxable capital gains distributions generally associated with ETFs
When considering adding ETFs to your portfolio, you should keep in mind that they are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. You should also note that ETFs are more suited for large investments, due to the trading costs associated with investing in ETFs. Additionally, these funds may be more appropriate for investors who do not frequently re-balance their positions due to their limited dividend re-investment opportunities. Furthermore, unlike mutual funds, ETF investors are subject to the usual costs of trading stocks, costs that are not associated with mutual funds.
We offer an array of sophisticated tools, news, and research to help you select and monitor ETFs in your portfolio. Some services are provided for free and other must be purchased under Investment Tools.
Online tools for educated ETF choices:
- Exchange-traded Fund (ETF) Screener filters quickly through thousands
of ETFs based on the criteria you set.
- Industry-leading research from Argus, Morningstar, and First Call, for
expert opinions as you make your decisions.
- Customizable charts show how your ETF’s performance stacks up compared
to published indices.
- Investment Analysis tools allows comparing individual holdings using
performance data and charts.
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You should carefully consider the investment objectives, risks, charges, and expenses before investing in ETFs and/or Mutual Funds. This and other important information is included in the prospectus, which should be read carefully before investing. Prospectuses can be obtained from your investment professional or through the investor's sign-in area of this site.