Types of ETFs

ETFs fall into several different styles and types to fit different investment strategies and asset allocations:

  • Market Index ETFs. Market ETFs typically track a major index like the NYSE Arca 100 and are usually some of the most actively traded ETFs. These ETFs seek to emulate the underlying index, not outperform it.
  • Foreign Market Index ETFs. Foreign Market ETFs provide investors with international exposure or the opportunity to hedge foreign investing risk. These fall into other categories by country or region.
  • Sector/Industry ETFs. Sector/Industry ETFs typically track a particular sector index representing a certain industry, for example, to gain exposure to a market sector like agriculture without having to purchase individual company stocks. 
  • Style ETFs. ETFs can also track a certain investment style or market capitalization. For example, rather than investing directly in growth stocks or large cap stocks, they track specific style indexes.
  • Bond ETFs. Bond ETFs are debt-based ETFs which gives investors opportunities in the bond market while maintaining the advantages of ETFs. 
  • Inverse ETFs. Inverse ETFs are a method of putting a short on an ETF position by buying an exchange-traded fund. They are used to inversely track an underlying index or investment product or hedge downside risk.

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