4: Types of ETFs

There are several different categories and types of exchange-traded funds (ETFs):

  • Major US index ETFs represent baskets of stocks linked to indexes such as the S&P 500.
  • Style/objective ETFs are baskets of stocks designed to track a specific investment style such as growth or value, small-capitalization or dividend-paying stocks.
  • Sector ETFs track the performance of stocks in specific sectors such as biotech, financials and healthcare.
  • International ETFs track the performance of broad international markets, emerging markets, specific regions and even individual countries.
  • Commodities ETFs track the performance of major commodities such as oil and gold, either through a basket of related stocks or ownership of the commodity itself.
  • Currency ETFs track the performance of major world currencies.
  • Bond ETFs represent baskets of corporate or government bonds.
  • Other specialty are based on more unusual or complex indexes and strategies. Some use leverage to increase their potential returns (which also increases their risk).