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.

Additional Education

The ABC of ETFs
Exchange-traded funds are similar to traditional mutual funds, but there are plenty of differences investors need to understand. Read more

Why FocusShares ETFs?
They’re low-cost, can be traded commission-free and track Morningstar® Indexes. Read more

Low Costs Matter
In the search for higher returns, investors typically consider a variety of factors. But when it comes to looking at similar exchange-traded funds and mutual funds, costs may be considered. Read more on homepage.

Understand What Can Affect ETF Returns
The total return of ETFs for investors can be affected by several factors, besides the performance of underlying securities. Be sure you’re up to speed on them. Read more

Common Sense in ETF investing
As an investor, ETFs might be an integral part of executing your investment strategy. But what are the right ETFs for you, and what should you look for in your research?

ETFs vs. Mutual Funds: Comparing Costs
In 2010 the average U.S. stock mutual fund imposes a net expense ratio of 0.84 percent, while the median expense ratio for a U.S. stock ETF is 0.48 percent, as of Feb. 14, 2012. Why the difference and what does it mean to investors?

ETFs vs. Mutual Funds: Passive vs. Active Investing
Perhaps the most fundamental difference between most exchange-traded funds and most mutual funds comes down to a simple question: Can investors consistently beat market returns? Check out the differences between active and passive investing.

While exchange-traded funds and mutual funds have many similarities, one of their primary differences is tax efficiency. In general, ETFs are considered more tax efficient than mutual funds.

How to Trade ETFs?
Buying and selling ETFs is just as easy as trading in any other kind of security, but you still need to know the basics.

ETF Creation and Redemption Mechanism
The creation and redemption mechanism is what makes an ETF more transparent and cost efficient than a mutual fund.

Getting Started With a Diversified ETF Portfolio
Create a diversification strategy to help build a well-balanced investment portfolio. There are 15 different Focus™ Morningstar ETFs to invest in.

Benefits of ETF Investing

ETFs have become a popular choice for investors and financial advisors for a few key reasons:

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.