This second lesson covers:
Types of ETFs available
Where and when ETFs are traded There are over 2,200 ETFs in the US ETF marketplace, as of mid-2019, with US$3.5 trillion of assets under management.
Some of the more popular ETFs
Sector ETFs Sector ETFs invest in stocks and securities of specific sectors, such as:
- consumer staples
- consumer discretionary
- real estate
They give you targeted exposure into that specific sector so you can take a “sector bet”.
Thematic ETFs provide exposure to related themes or trends – what is hot in the market right now or what a lot of people are talking about, such as:
technology trends, including
- cloud computing
- Artificial Intelligence
Environmental Social and Corporate Governance (ESG)
WisdomTree was one of the pioneers of factor ETFs, which provide exposure to certain fundamental attributes such as dividends or earnings, or other factors that are related to higher returns which target those specific factors such as:
A lot of factor ETFs fall into the bucket known as smart beta, which is also known as modern alpha at WisdomTree.
Leveraged ETFs use derivatives or take on debt to magnify exposure, both long and short, for a specific investment – exposure that the ETF is designed to track. The important thing to understand about leveraged ETFs is they are designed to be daily trading vehicles. They are reset at the end of the day and provide leveraged exposure for one single day.
- not meant to be held for long-term exposure
- designed to be used on a single trading day
Where ETFs trade
ETFs are all listed on a stock exchange, but you must trade them through:
- a platform that is connected to a stock exchange
- an alternative trading platform such as Interactive Brokers, or other discount brokerages
You need to be able to access a broker-dealer platform to be able to access ETFs that are listed on an exchange.
Disclosure: Wisdom Tree
WisdomTree is not affiliated with Interactive Brokers LLC
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Academy that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Academy are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Wisdom Tree and is being posted with permission from Wisdom Tree. The views expressed in this material are solely those of the author and/or Wisdom Tree and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.