James Dennin, Kapitall: ETFs that track an index are kind of like mutual funds behaving like stocks. If that seems confusing, read on. One way for investors to combine the diversification of a mutual fund with the benefits of trading stocks is to look at exchange traded funds (ETFs). Invented in 1993, ETFs trade on public exchanges exactly like stocks, but contain bundles of assets, sort of like a mutual fund. Read more on ETFs from Kapitall: Green Investments Green Returns: Eco Friendly ETFs to Consider ETFs appeal to more active traders and investors, because unlike mutual funds, they can be traded throughout the day. Investors who want to make bets on a particular index – as opposed to single stocks – can buy ETFs made up solely of stocks that trade on that index. Conversely, ETFs can also be used to make more speculative plays. They can be shorted like stocks can, and have lower fees than mutual funds – because they are usually traded through a broker - and you can buy as many (or as few) shares as you want. Click on the interactive charts below to view prices for these ETFs that track an index over time. As you can see, ETFs often trade extremely closely to the index that they mirror. However, they can also be purchased with varying degrees of volatility. Some ETFs offer greater risk/reward potential than the index they are following, while some offer less. Another benefit to ETFs is that they make it incredibly easy to diversify, because you can bet on trends as opposed to having to pick winners and losers within that trend. There are ETFs tracking emerging markets, specific countries, specific industries and even certain kinds of products. There are ETFs that trade large caps and small caps and mid caps in between.
ETFs hedge some of the risk of investing in single stocks, and they provide an often easier way to capitalize off of trends that you don't necessarily know much about. For instance, someone without industry expertise could buy an ETF that traded oil and gas stocks, and perhaps feel more confident that their investment will grow, assuming they were right about oil in the first place.So do you see investing opportunities in these ETFs that track a major index? Use the list below to begin your own analysis. 1. iShares Core S&P 500 ( IVV): Seeks to track the investment results of an index composed of large-capitalization U.S. equities. Market cap at $23.70B, most recent closing price at $180.35.
2. iShares Core S&P Small-Cap ( IJR): Seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P SmallCap 600 Index. Market capitalization at $13.5B, most recent closing price at $104.97.
3. iShares Russell 1000 ETF ( IWB): Seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Russell 1000 Index. Market cap at $8.40B, most recent closing price at $100.14.
4. iShares Russell 2000 ETF ( IWM): Seeks to provide a high level of current income while preserving assets and maintaining liquidity and investment quality. Market cap at $23.7B, most recent closing price at $110.40.
5. iShares Russell 3000 ( IWV): A capitalization-weighted index of the largest public companies domiciled in the US and its territories. Market cap at $5.0B, most recent closing price at $107.36.
6. PowerShares QQQ Trust, Series 1 ( QQQ): Seeks to provide investment results that generally correspond to the price and yield performance of the component securities of the Nasdaq-100 Index. Market cap at $41.3B, most recent closing price at $83.80.
7. SPDR Dow Jones Industrial Average ETF ( DIA): Provide investment results that, before expenses, generally correspond to the price and yield performance of the component stocks of the DJIA. Market cap at $11.30B, most recent closing price at $158.43.8. SPDR S&P 500 ETF ( SPY): Seeks investment results that, before expenses, generally correspond to the price and yield performance of the component common stocks of the S&P 500 Index. Market cap at $158.78B, most recent closing price at $179.27.
9. Vanguard Total Stock Market ETF ( VTI): Seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. Market cap at $37.5B, most recent closing price at $93.03. ( List compiled by James Dennin, a Kapitall Writer. Stock prices sourced from Zacks Investment Research, all other data sourced from Finviz.)