ETF Education
About Morningstar® IndexesMorningstar is known by investment professionals globally for its thorough, objective research and astute market insight. The Morningstar team of researchers applies this same rigorous, discerning approach when constructing Morningstar Indexes.
Morningstar’s broad-market indexes represent 97% of the market, tracking thousands of liquid, investable stocks-not just the largest ones. Sector indexes also pull from this wide body of securities, providing depth and diversity within each carefully categorized sector.
Morningstar’s broad-market indexes represent 97% of the market, tracking thousands of liquid, investable stocks-not just the largest ones. Sector indexes also pull from this wide body of securities, providing depth and diversity within each carefully categorized sector.
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ETF Education |  |
An exchange-traded fund (ETF) is a basket of securities that combines the diversification of a mutual fund and the trading flexibility of common stock. ETFs group together securities to track an index, and they are traded on an exchange throughout the day.
Tracking an index means that an ETF typically contains shares of all or most securities within the index, so the performance of the ETF generally corresponds, before fees and expenses, to the performance of the index.
Key Features of ETFs
ETFs share qualities of both stocks and mutual funds:
Tracking an index means that an ETF typically contains shares of all or most securities within the index, so the performance of the ETF generally corresponds, before fees and expenses, to the performance of the index.
Key Features of ETFs
ETFs share qualities of both stocks and mutual funds:
| ETF | Stocks | ETFs | Mutual Funds |
| Continuous trading and pricing throughout the day | Yes | Yes | No |
| Can be bought on margin | Yes | Yes | No |
| Can buy/sell options | Yes | Yes | No |
| Can be actively traded | Yes | Yes | No |
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Benefits of ETF Investing | |
ETFs have become a popular choice for investors and financial advisors for a few key reasons:
To learn more about the ETFs brought to you by FocusShares, read the fund family's prospectus.
- Lower Expense Ratios – The expense ratios of ETFs are consistently lower than actively managed mutual funds because they are passively managed. Lower costs without sacrificing quality are a key attraction.
- Tax Efficiency – ETFs are renowned for their low portfolio turnover. For shareholders, this can translate into lower tax liabilities.
- Liquidity – ETFs trade throughout the market day and can be bought and sold at the click of a button. The ETF's underlying securities provide the ETF with its liquidity. Many ETFs also allow the investor to take advantage of price movements using options, where an investor agrees to buy or sell the ETF at a predetermined price and time in the future. ETF investors also take advantage of an ETF's liquidity through short sales, where the investor sells borrowed shares in anticipation of a price decline.
- Transparency – ETFs publish their exact holdings daily, so you always know what you're buying.
