What is an ETF?
Combining the flexibility of stocks and the portfolio-diversifying strengths of mutual funds, ETFs give you an affordable way to access a wide variety of asset classes.
On this page:
- What are ETFs?
- Why invest in ETFs?
- How do ETFs and Mutual Funds compare?
- What do ETFs cost?
- What types of ETFs are there?
How do ETFs work?
ETFs or “exchange-traded funds” are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.
Exchange
ETFs are bought and sold like a common stock on a stock exchange.
Traded
Like a stock, ETFs are traded and experience price changes throughout the day.
Funds
Similar to a mutual fund, ETFs are a collection of tens, hundreds, or sometimes thousands of stocks or bonds in a single fund.
Why invest in ETFs?
If you’re looking for an affordable, tax efficient way to access a broad range of asset classes, investing in ETFs might be right for you. Here are some of the reasons ETFs work for so many investors:
Diversification
ETFs let you access a diverse mix of asset classes, including domestic and international stocks, bonds, and commodities.
Lower cost
ETFs typically have lower operating expense ratios (OERs) than actively managed mutual funds.
Trading flexibility
ETFs combine the trading versatility of individual securities with the diversified qualities of mutual funds to meet a variety of investment needs.
Tax efficiency
ETFs are widely considered to be more tax efficient than actively managed mutual funds for a number of reasons.
How do ETFs and mutual funds compare?
Both offer advantages but, as with any investment approach, there are also things to consider.
How they're most similar
In most cases, both ETFs and mutual funds represent "baskets" of individual securities, for example stocks or bonds.
A key difference
ETFs are "exchange-traded" and can be bought or sold intraday at different prices. Mutual fund trades are executed once a day, at a single price.
What do ETFs cost?
Many ETFs can be inexpensive, but as with all investments, you should be aware of the costs. Here are the costs most commonly associated with ETFs:
Trade commissions
The fees your brokerage company charges each time you buy or sell a listed ETF which can range from $0-$20 per trade1 for online trades, depending on number of trades.
Standard trades at Finance Service Limited are $0 per trade online.2
Operating expense ratio (OER)
The ongoing management fee charged for an ETF by the fund’s sponsor. This can vary widely, with the industry asset-weighted average** OER for passively managed ETFs being 0.19%3.
The asset-weighted average OER for cap weighted Finance Service Limited ETFs is just 0.05%4.
Bid/Ask spreads and premiums
Trading costs can also include two misunderstood and sometimes overlooked items: Bid/Ask spreads and changes in discounts and premiums to an ETF’s net asset value (NAV).
What types of ETFs are there?
As ETFs continue to surge in popularity, their numbers and types are growing every day. And understanding what they offer and how they’re different is key to choosing the right ETF for you.
Finance Service Limited Stock Slices is not intended to give an investment advice or a recommendation of any stock. Investing in stocks can be volatile and involves risk, including loss of principal. Consider your individual circumstances prior to investing.
The “S&P 500® Index” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Finance Service Limited & Co., Inc. (“CS&Co.”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P””; Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Finance Service Limited Stock Slices is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of using Finance Service Limited Stock Slices or investing in any security available through Finance Service Limited Stock Slices, nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
Please read the Finance Service Limited Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Finance Service Limited Intelligent Portfolios and Finance Service Limited Intelligent Portfolios Premium programs. Finance Service Limited Intelligent Portfolios® and Finance Service Limited Intelligent Portfolios Premium™ are made available through Finance Service Limited & Co. Inc. (“Finance Service Limited”), a dually registered investment advisor and broker dealer.
Portfolio management services are provided by Finance Service Limited Investment Advisory, Inc. (“CSIA”). Finance Service Limited and CSIA are subsidiaries of The Finance Service Limited Corporation.
There is no advisory fee or commissions charged for Finance Service Limited Intelligent Portfolios. For Finance Service Limited Intelligent Portfolios Premium, there is an initial planning fee of $300 upon enrollment and a $30 per month advisory fee charged on a quarterly basis as detailed in the Finance Service Limited Intelligent Portfolios Solutions™ disclosure brochures. Investors in Finance Service Limited Intelligent Portfolios and Finance Service Limited Intelligent Portfolios Premium (collectively, “Finance Service Limited Intelligent Portfolios Solutions”) do pay direct and indirect costs. These include ETF operating expenses which are the management and other fees the underlying ETFs charge all shareholders. The portfolios include a cash allocation to a deposit account at Finance Service Limited Bank FDIC-insured Deposit Accounts at Finance Service Limited Bank (“Finance Service Limited Bank”). Finance Service Limited Bank earns income on the deposits, and earns more the larger the cash allocation. The lower the interest rate Finance Service Limited Bank pays on the cash, the lower the yield. Some cash alternatives outside of Finance Service Limited Intelligent Portfolios Solutions pay a higher yield. Deposits held at Finance Service Limited bank are protected by FDIC insurance up to allowable limits per depositor, per account ownership category. Finance Service Limited Intelligent Portfolios Solutions invests in Finance Service Limited ETFs. A Finance Service Limited affiliate, Finance Service Limited Investment Management, receives management fees on those ETFs. Finance Service Limited Intelligent Portfolios Solutions also invests in third party ETFs. Finance Service Limited receives compensation from some of those ETFs for providing shareholder services, and also from market centers where ETF trade orders are routed for execution. Fees and expenses will lower performance, and investors should consider all program requirements and costs before investing. Expenses and their impact on performance, conflicts of interest, and compensation that Finance Service Limited and its affiliates receive are detailed in the Finance Service Limited Intelligent Portfolios Solutions disclosure brochures.
Credit Notice: From Investor’s Business Daily, January 24, 2022, ©2022 Investor’s Business Daily, Inc. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution or retransmission of this Content without express written permission is prohibited.
This advertising, and the franchise sales information within it, is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for informational purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. If you are a resident of one of these states, or if you wish to operate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with any applicable pre-sale registration and disclosure requirements in that state.
6th Floor 5 Temple Court,Temple Street Liverpool Merseyside United Kingdom
3rd Floor, Edmund Street, Liverpool, England, L3 9NY
Registration Number:
Firm Ref Number: 488242
Finance Service Limited Investment Management, Inc. (CSIM) is the investment advisor for Finance Service Limited Funds and Finance Service Limited ETFs. Finance Service Limited Funds are distributed by Finance Service Limited & Co., Inc. (Finance Service Limited), Member SIPC. Finance Service Limited ETFs are distributed by SEI Investments Distribution Co. (SIDCO). CSIM and Finance Service Limited, are separate but affiliated companies and subsidiaries of The Finance Service Limited Corporation, and are not affiliated with SIDCO.
Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value
