ETFs
Flexible, Diversified Investing
Exchange-traded funds (ETFs) provide access to diversified portfolios of stocks, bonds or other assets while trading throughout the day like individual stocks.
What Are ETFs?
An exchange-traded fund, or ETF, is an investment fund that holds a collection of securities such as stocks, bonds or other assets.
Unlike traditional mutual funds, ETFs trade on stock exchanges throughout the day, allowing investors to buy and sell shares at market prices.
ETFs are available across many markets, industries and investment strategies and are commonly used for diversification and long-term investing.
Why Consider ETFs?
Diversification
One ETF can provide exposure to dozens, hundreds or even thousands of individual securities.
Trading Flexibility
ETF shares can generally be bought and sold during normal market hours like individual stocks.
Cost Efficiency
Many ETFs have relatively low expense ratios, particularly funds that track broad market indexes.
Explore ETF Types
Stock ETFs
Invest primarily in stocks and may track broad markets, sectors or specific investment strategies.
Bond ETFs
Hold portfolios of government, corporate or other fixed-income securities.
Index ETFs
Designed to track the performance of a particular market index.
Sector ETFs
Focus on specific industries such as technology, healthcare, financials or energy.
Dividend ETFs
Invest in companies selected partly for their history or level of dividend payments.
International ETFs
Provide exposure to companies and markets outside the United States.
Compare Common ETF Types
Feature Stock ETFs Bond ETFs Index ETFs Main Holdings Stocks Bonds Securities in an index Primary Goal Growth Income/stability Market tracking Typical Risk Moderate to higher Lower to moderate Varies Income Potential Varies Often higher Depends on index Common Use Long-term growth Income/diversification Broad market exposure
ETF Fees and Costs
ETFs can involve several costs that may affect overall investment returns.
Common costs may include:
Expense ratios
Brokerage commissions
Bid-ask spreads
Trading costs
Account fees
Premiums or discounts to net asset value
Sample ETF Comparison Table
Date updated:
ETF Type Expense Ratio Trading Risk Level Primary Focus Stock ETF — Intraday Higher Growth Bond ETF — Intraday Lower-Moderate Income Index ETF — Intraday Varies Market tracking Sector ETF — Intraday Higher Specific industry Dividend ETF — Intraday Moderate Income + growth International ETF — Intraday Varies Global diversification
Disclaimer: ETF fees, holdings, performance and risk vary by fund. Investments can lose value, and past performance does not guarantee future results.
What can Affect ETF Performance?
Market Conditions
Changes in financial markets can cause ETF prices to rise or fall.
Underlying Holdings
An ETF’s performance depends largely on the securities held inside the fund.
Fees
Expense ratios and trading costs can reduce an investor’s net return.
Interest Rates
Rate changes can significantly affect bond ETFs and interest-sensitive investments.
Tracking Difference
Index ETFs may not exactly match the performance of the index they are designed to follow.
Currency Risk
International ETFs may be affected by changes in foreign currency exchange rates.
Who May Consider ETFs?
ETFs may be worth considering if you want diversified investments with the ability to trade during market hours.
Common Reasons
Building a diversified portfolio
Investing for retirement
Seeking lower-cost index exposure
Adding stocks or bonds
Investing in specific sectors
Accessing international markets
Building long-term wealth
Benefits and Things to Consider
Things to Consider
Coverage eventually expires
Renewal premiums may increase
Most term policies do not build cash value
Coverage becomes more expensive as you age
Conversion and renewal options vary by policy
Benefits
Market value can decline
Trading costs may apply
Sector ETFs can be concentrated
Some ETFs are complex
Market price can differ from underlying asset value
ETFs vs. Other Investments
ETFs
Diversified funds that trade throughout the day on a stock exchange.
Mutual Funds
Pooled portfolios generally bought or sold based on the fund’s end-of-day net asset value.
Individual Stocks
Direct ownership in individual companies with greater control but less built-in diversification.
Common ETF Questions
Policies commonly provide coverage for periods such as 10, 20 or 30 years, although other term lengths may be available.
ETFs pool investor money to hold a portfolio of securities and trade on exchanges throughout the day.
No. ETFs are investments and can gain or lose value.
The expense ratio represents the annual operating expenses charged by the fund.
Some ETFs distribute dividends or interest received from the securities they hold.
ETFs generally trade throughout the day, while traditional mutual funds are usually priced once per day.
Yes. ETF prices fluctuate based on market conditions and the value of their underlying holdings.
ETFs are commonly held in retirement accounts, but suitability depends on your goals, time horizon and risk tolerance.
ETF stands for exchange-traded fund.
Related Investment Options
Mutual Funds
Explore professionally managed diversified investment portfolios.
Stocks
Learn about direct ownership in publicly traded companies.
Bonds
Explore fixed-income investments designed for income and diversification.
529 Plans
Explore tax-advantaged investment accounts for education expenses.
Ready to Explore ETFs?
Compare ETF types, costs and investment strategies to find options that may fit your financial goals.
