An exchange-traded fund, or ETF, is a type of investment fund that can be bought and sold on a stock exchange.
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While less than half of retail investors hold ETFs in their portfolio, this figure is up dramatically in recent years, and experts forecast continued adoption as more options hit the market and total ETF assets under management continue to grow.
Many experts consider ETFs to be more tax-efficient—ETFs are less likely to trigger capital gains taxes that must be passed on to the fund holder.
Exchange-traded funds are relatively new inventions, and they’ve grown significantly in popularity during their few decades of existence. They were first created as an alternative to mutual funds. A colorful visualization depicts the entire history of ETFs.
Exchange-traded funds seem to offer something for everyone. As tracked by ETF.com, there are 338 thematic ETFs, offering exposure to “baskets” of stocks covering global infrastructure, genomics, cannabis, and more.
In 2024, the SEC approved ETFs that track the price of bitcoin called spot bitcoin ETFs. These funds have since significantly increased investment inflows into cryptocurrency markets.
Investors are likely most familiar with ETFs that invest in an index or other grouping of stocks. However, BlackRock breaks down a wide variety of options, including commodity ETFs, currency ETFs, and bond ETFs.
From the Dutch East India Company paying out the first dividends over 400 years ago to the word “dividend’s” ancient Latin roots, Dividend.com has a full explainer of this investing perk and how individuals can earn income while holding dividend-paying stocks or ETFs.
Cathie Wood is the fund manager and stock picker behind Ark Invest and its flagship Ark Innovation ETF. Her strategy centers around disruptive technology, and she’s made bold bets on cryptocurrency and companies like Tesla, Robinhood, and Nvidia. Wood has a loyal following of retail investors who watch her daily trades religiously.
One unexpected perk is that ETFs are typically associated with lower capital gains tax requirements. Read this list to learn more about the benefits of investing in ETFs.
State Street, a popular ETF issuer, is responsible for the SPDR S&P 500 ETF. This fund trades under the SPY ticker, and State Street maintains a web page with key facts and figures on SPY. For instance, its expense ratio is 0.0945%, or $9.45 on an initial $10K investment.
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