Exchange Traded Funds (ETFs) began trading in 1993. There are now over 5,000 ETFs available around the world with $3 trillion in assets under management.
Briefly, an ETF is a basket of securities that you can buy or sell through a brokerage firm on a stock exchange. ETFs are offered on a variety of asset classes from traditional investments to alternative assets like commodities or currencies. In addition, innovative ETF structures allow investors to short markets, gain leverage and avoid short-term capital gains taxes.
In general, ETFs are similar to mutual funds, however one big distinction remains: Exchange Traded Funds can be traded throughout the day as often as desired, whereas traditional mutual funds can only be bought at the close of the NYSE (3 p.m. Central Time). ETFs are appealing to small and large investors alike.
With the wide variety of ETFs, one can structure an asset allocation strategy that would include stocks (large-, medium- and small-cap stocks), bonds (Treasury bonds, Corporate bonds, junk bonds in a variety of maturities) and alternatives such as commodities and managed futures.
Factoid: The ETF industry has grown to a $3 trillion industry over the past 24 years. iShares (Blackrock), SPDR and Vanguard are the three largest ETF sponsors.
|Ticker||ETF||Assets Under Management||Average Daily Volume|
|SPY||SPDR S&P 500 ETF||$239,276,052.61||76,066,969|
|IVV||iShares Core S&P 500 ETF||$116,403,069.01||3,442,363|
|VTI||Vanguard Total Stock Market ETF||$80,155,071.96||2,225,017|
|EFA||iShares MSCI EAFE ETF||$76,534,431.32||20,503,482|
|VOO||Vanguard S&P 500 ETF||$69,859,178.73||1,969,200|
|VWO||Vanguard FTSE Emerging Markets ETF||$55,316,826.32||12,083,938|
|VEA||Vanguard FTSE Developed Markets ETF||$54,325,375.85||8,310,451|
|QQQ||PowerShares QQQ ETF||$52,285,624.98||25,010,881|
|AGG||iShares Core U.S. Aggregate Bond ETF||$45,720,552.20||2,177,791|
|IJH||iShares Core S&P Mid-Cap ETF||$40,612,471.42||1,474,611|
|IWM||iShares Russell 2000 ETF||$37,799,641.52||30,030,736|
|IWD||iShares Russell 1000 Value ETF||$37,331,007.20||2,208,491|
|IWF||iShares Russell 1000 Growth ETF||$36,220,280.68||1,526,929|
|GLD||SPDR Gold Shares ETF||$35,484,409.60||7,823,456|