What is ETFs

What is an ETF

An exchange-traded fund (ETF) is an investment fund that holds financial assets in a diversified portfolio rather than owning individual stocks and assets directly and can be bought and sold on an exchange. Shareholders indirectly own the assets of the fund and are entitled for the fund's profit to a share.

Expenses ratio

Most ETFs charge annual expense ratios which are mostly up-to 1% of the investment value.

Types of ETFs

There are many types of ETFs, but we will only be covering a few types that are popular.

1. Index ETFs: They try to replicate the performance of an index mostly by buying and selling and adjusting the holding of the exact same securities in the same proportions as a certain index does.

2. Sector or Industry ETFs: They try to replicate the performance of a specific industry or sector by holding assets of companies inside that industry with more diversified inside of that specific sector or industry.

3. Commodity ETFs: They try to replicate the performance of specific assets like gold, silver by holding the assets that are more physical, and it seems cheaper to hold commodity ETFs than holding real commodities.

4. Inverse ETFs: They are designed to perform or replicate the performance of the inverse of whatever index or benchmark it is designed to track.

5. Leveraged ETFs: They are designed to replicate the performance of the assets in some multiples(like 2x,3x) on the return of the underlying assets.