ETF meaning

Below I define 7 different types of ETFs and explain each ETF meaning. Take a look at each one to expand your knowledge on how each one of them could fit into your investment portfolio and hopefully you gain some new ideas. 

What is an Equity ETF

Equity ETFs track a particular set of related stocks. It can be ETFs covering large businesses, small businesses, or stocks from a specific country. Keep in mind the goal of an equity ETF is to mirror an underlying index, not outperform it.

Bond and Fixed Income ETF

Bond ETFs give investors exposure to the bond market. You can find broad market bond ETFs that cover the entire market, or bond sector ETFs that focus on particular types of bonds. This includes Treasury bonds, corporate debt, or international sovereign obligations of foreign nations. These are low risk investments. 

Sector Industry ETF

Sector or industry ETFs let you invest in stocks within a particular sector/ industry of the market. These ETFs allow investors to gain exposure to a certain market sector, such as consumer staples or technology, rather than holding a single stock. Learn how to target sectors and how they behave.

Commodity ETF

Commodity ETFs offer exposure to commodity markets, such as gold, oil or agriculture, which can provide returns that aren't necessarily correlated to those of the stock market. Commodity ETFs are attractive alternatives to stocks for investors looking to diversify across asset classes.

Foreign Currency ETF

Foreign currency ETFs help investors gain exposure to foreign currencies without the hassle of having complex transactions. Foreign currency ETFs may track a single currency or a basket of currencies.

Leveraged ETF

Leveraged ETFs are constructed using financial derivatives and/or debt to track an underlying index at higher rates of return. While a typical ETF tracks its underlying index closely, a leveraged ETF aims to offer 2-3 times the returns of a typical ETF, and therefore makes it a riskier investment too.

Inverse ETFs

As its name suggests, inverse ETFs allow investors to profit when the market or underlying index declines, without having to sell anything short.