Fueling the rapid expansion in the ETF space, more providers are coming out with interesting and new investment objectives. For instance, a growing number of new index fund products track customized investment objectives, or so-called smart-beta strategies, that promise to provide enhanced returns or lower volatility, compared to traditional beta-index funds. Additionally, some passive ETFs try to generate multiple or reverse returns to a target index – these type of ETFs are often referred to as leveraged or inverse ETFs. [Look Before Leaping Into Smart-Beta ETFs]
Lastly, investors should know what their ETF tracks. As the ETF industry comes out with more products, the variety of benchmark indices has also increased. While some indices cover broad markets, such as a total stock market or a aggregate bond index, an index can focus on a narrow target, like smaller companies, market sectors and international corporations, among others.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed this article.