Exchange-Traded Funds (ETFs)

One-stop, lower-cost diversification. Basket of equities, fixed income, or commodities.Flexibility to buy and sell quickly—just like stocks. 24×5 trading on a select group of widely traded ETFs

Why trade exchange-traded funds (ETFs)?

ETFs combine the ease of stock trading with potential diversification. They are baskets of stocks and bonds, many of which are built to track well-known market indexes like the S&P 500®. Before you can really understand how an exchange-traded fund (or ETF) works, you should first understand indexes. An investment index is a way to observe a big cross-section of stocks or bonds. For example, the Standard & Poor’s 500 (better known as the S&P 500) is one of the world’s best known indexes. It’s the most commonly used benchmark for the overall stock market. But because, technically, you can’t actually buy an index, an ETF is one way to invest in a broad market segment or the market as a whole. That’s because ETFs trade on a stock exchange and experience price changes throughout the day as they are bought and sold.

How can ETFs fit into my portfolio?

The first ETF in the U.S. was launched in 1993 and was designed to track the S&P 500. Since then, the ETF market has expanded significantly, and it now includes hundreds of funds, including very specific, narrowly focused funds tracking smaller and smaller segments of the stock and bond markets.

But ETFs can also be used as the building blocks of your portfolio. ETFs can also complement investments you already own, fill in gaps or provide diversification.