Tag Archives: etf

ETFs, like index mutual funds, monitor a benchmark index passively. As a result, the top ETFs have the lowest expense ratios. If you're looking for an ETF that mirrors the S&P 500 Index, the one with the minor expense ratio is likely to be the best option. If the expense ratios are close, you should choose the one with the most assets under management. If you're searching for the best ETFs to invest in, the largest ETFs by assets under management are a great place to start. Unlike their mutual fund siblings, exchange-traded funds (ETFs) with the most money invested in them can have benefits over ETFs with fewer assets under management.  The total market value of the securities that a person or corporation manages on behalf of clients is known as assets under management (AUM).   The standards and methods for assets under management differ from firm to firm. Some financial firms calculate AUM by including cash deposits, unit trusts, and money. Others limit it to funds under permissive management, in which the investors deputized trading rights to the corporation.  One of the most important characteristics when purchasing exchange-traded funds (ETFs) is assets under management. Trading volume, costs, and monitoring records are valuable data points to investigate. Investors avoid buying sparsely traded ETFs, which explains the high holdings and trading volume.  There is the possibility for more severe price movements when there are fewer investors (implying lower volume) (or what is called the "spread"). ETFs can trade at a markup or a discount, just like closed-end mutual funds. The greater the assets and trading volume, the narrower the spread.  Finally, ETFs with a solid track record are usually preferable to those with a poor track record. The ETF's tracking record indicates how closely it has followed the benchmark. The better the fund performs, the closer it gets to the bar.  Returning to the initial premise, ETFs with the most assets under management have more trading volume, lower expenses, and better monitoring. As a result, the most significant feature of the best ETFs to look for is assets under management.  An ETF's AUM is calculated by multiplying the shares outstanding by the current market price per share. The value of an ETF's assets will fluctuate due to changes in the underlying securities' weight and the formation of new shares or redemption of current shares.   It's worth mentioning that the market capitalization of an ETF and the net asset value (NAV) of its underlying securities may differ. The discrepancy results in a discount or a premium in the ETF's trading price.  Top 3 ETFs with the highest AUM Sr NoSymbolNameAUMAverage Daily Share Volume (3 Months)1SPYSPDR S&P 500 ETF Trust$386,633,000.00112,509,6802IVViShares Core S&P 500 ETF$310,256,000.008,616,1863VTIVanguard Total Stock Market ETF$273,050,000.005,093,524 1. SPDR S&P 500 ETF Trust Essentials IssuerState StreetBrandSPDRStructureUITExpense ratio0.09%InceptionJan 22, 1993Index TrackedS&P 500 IndexSegmentEquity US Large CapWeighting SchemeMarket Cap 2. iShares Core S&P 500 ETF Essentials IssuerBlackrock Financial ManagementBrandiSharesStructureETFExpense ratio0.03%InceptionMay 15, 2000Index TrackedS&P 500 IndexSegmentEquity US Large CapWeighting SchemeMarket Cap 3. Vanguard Total Stock Market ETF Essentials IssuerVanguardBrandVanguardStructureETFExpense ratio0.03%InceptionMay 24, 2001SegmentEquity US Total MarketWeighting SchemeMarket Cap FAQs How can I save for my child’s higher education? It is extremely important for parents to realize that their saving needs to beat inflation for them to afford the future cost of education. They should choose an asset class that provides them with inflation-beating returns. In most cases, mutual funds offer better returns than other investment vehicles, which can help parents save for their child’s education.  What ETF has the lowest fees?   JP Morgan Betabuilders US Equity ETF   Vanguard total stock market ETF   iShares Core S&P 500 ETF  What is an expense ratio? The fee that mutual-fund or exchange-traded fund charge investors are Expense ratio. This charge covers the costs of management, asset allocation, marketing, and other services.    These charges are calculated as a portion of an investor’s annual cost. ETF expense rates are often less than 1%. That means you spend less than $1 per year on expenses for every $100 you invest.   How much should I invest in my child’s education? Saving money without a target is challenging. As soon as your child decides what they want to pursue, look out for colleges or universities that offer the course and do your research to find out the tuition fees and accommodation costs to get an idea of the total cost of education and then explore saving plans that can help you accumulate the amount you need for college.   What were the top 3 ETFs in 2022? SPDR S&P 500 ETF Trust   iShares Core S&P 500 ETF   Vanguard Total Stock Market ETF What is an ETF?   An exchange-traded fund is an investment vehicle similar to a mutual fund. ETFs are traded on stock exchanges. ETF tracks a commodity, index, bond, or basket of assets like an index fund.   Should I put all my savings into an ETF? It is extremely dangerous to put all your savings into one asset class. As the popular saying goes, ‘Don’t put all your eggs in one basket,’ investors should look to diversify their portfolios.  Is ETF better than a mutual fund?   ETFs and mutual funds are two different investment vehicles for investors. ETFs are both actively and passively managed, but most are passively managed. Most mutual funds are actively managed by fund managers. An investor needs to understand what an investment vehicle offers and how it can help them reach their goal. There’s no right answer to this question, as it differs based on an individual’s financial goals.    

Earlier, we read about the top 3 ETFs in the small-cap category and the top 3 in the mid-cap category. Here, we will have a look at the top three ETFs in the micro-cap category.  Before finding out what the top 3 ETFs in the micro-cap category are, we must first understand what micro-cap is. What is a micro-cap?  A micro-cap is a publicly listed corporation in the United States with a market capitalization of less than $300 million.   Micro-cap firms have a more significant market cap than nano-cap businesses, but they have a lower market capitalization than any other type of company. For firms with larger market capitalizations, stock prices are not always higher than those with lower market capitalizations.   Nano and micro-cap corporations are notorious for their fluctuation, and as a result, they are viewed as risky than companies with more significant market capitalization.   Micro-caps are also high-risk because many of them have unproven goods and no firm history, resources, sales, or operations.   They are also susceptible to higher price shocks due to a lack of liquidity and a minuscule shareholder base.  As micro-cap equities have a market capitalization of $50 million to $300 million, investors can expect higher volatility and risk than equities in the S&P 500.   On the other hand, micro-caps tend to do better than their larger counterparts in periods of bullish strength.  The top 3 recommendations in the micro-cap category ETFs  Rank ETF 1 SPDR S&P 600 Small Cap Value ETF2 iShares S&P Small-Cap 600 Value ETF3 WisdomTree U.S. SmallCap Dividend Fund 1. SPDR S&P 600 Small Cap Value ETF  SLYV is a small-cap value fund that follows the S&P SmallCap 600 Value Index. It has a lesser tilt than its index and provides good small-cap value exposure.   Its constituents are selected from the S&P SmallCap 600 companies with the best value characteristics, as measured by the following ratios  book value-to-price ratio   earnings-to-price ratio  sales-to-price ratio  The fundamental benchmark’s weight is the respective market capitalization and is rebalanced once a year. The fund uses a sampling technique, which implies this might not possess all of the underlying assets in the same proportions, but it does hold exposure with a similar investment profile.   The MSCI ESG Fund Rating for the SPDR S&P 600 Small Cap Value ETF is BBB, reflecting a score of 5.16 out of 10.  Performance  Performance [as of 16/03/22]1 year3 years5 years10 yearsSLYV-4.94%12.16%10.27%10.95%S&P Small Cap 600 Value-0.98%13.00%9.91%11.96% The fund invests entirely in the United States.  SLYV Top 10 holdings  Source: etf.com SLYV details  BrandSPDRExpense Ratio0.15%YTD Return-3.84%AUM$4.12BNumber of Holdings459Avg. Spread ($)$0.09Average Daily $ Volume$19.87M 2. iShares S&P Small-Cap 600 Value ETF   IJS invests in potentially undervalued small-cap firms in the United States.   The S&P SmallCap 600 Underlying Index identifies value stocks with the most vital fundamental qualities, Price book value, and price to earnings ratio, and sales-to-price ratio, from the S&P SmallCap 600.   Once a year, in December, the underlying index is rebalanced. The MSCI ESG Fund Rating for the iShares S&P Small-Cap 600 Value ETF is BBB, based on 5.16 out of 10.  Performance  Performance [as of 16/03/22]1 year3 years5 years10 yearsIJS-5.09%12.01%9.30%11.51%S&P Small Cap 600 Value-0.98%13.00%9.91%11.96% The fund invests entirely in the United States.  IJS Top 10 holdings  Source: etf.com IJS details  BrandiSharesExpense Ratio0.18%YTD Return-4.02%AUM$8.71BNumber of Holdings458Avg. Spread ($)$0.07Average Daily $ Volume$51.83M 3. WisdomTree U.S. SmallCap Dividend Fund  As it is a yield-focused fund, DES stands out among the slew of US small-cap ETFs. By overweighting dividend-heavy industries, DES' strategy provides a greater dividend yield than the market. DES favors the micro-cap end of the small-cap spectrum.   After the 300 largest corporations are excluded, the residual market capitalization of the WisdomTree US Dividend Index the dividend-paying world of businesses in the US stock market is used to determine index components.   Companies that make up the lowest 25% of the residual market capitalization are taken into account. Every year, the Underlying Benchmark is rebalanced.   The fund's index was previously known as the WisdomTree Small Cap Dividend Index until June 30, 2017.  Performance  Performance [as of 16/03/22]1 year3 years5 years10 yearsDES-0.46%7.38%6.27%9.97%WisdomTree U.S. Small Cap Dividend Index2.77%8.39%6.96%10.41% The fund invests entirely in the United States. DES top 10 holdings  Source: etf.com DES details  BrandWisdomTreeExpense Ratio0.38%YTD Return-4.05%AUM$1.85BNumber of Holdings677Avg. Spread ($)$0.03Average Daily $ Volume$5.45M One should look at these ETFs before investing in the micro-cap category in the USA.  FAQs What is a micro-cap?  A micro-cap is a publicly listed corporation in the United States with a market capitalization of less than $300 million.  Micro-cap firms have a more significant market cap than nano-cap businesses, but they have a lower market capitalization than any other type of company. For firms with larger market capitalizations, stock prices are not always higher than those with lower market capitalizations. What are the 3 best ETFs for micro-cap category investing? SPDR S&P 600 Small Cap Value ETF iShares S&P Small-Cap 600 Value ETF WisdomTree U.S. SmallCap Dividend Fund Is Micro-cap investing risky? Micro-caps are also high-risk because many of them have unproven goods and no firm history, resources, sales, or operations.   Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the earlier article, we talked about the top 3 ETFs in the small-cap category. This article will look into the top three ETFs in mid cap category.  Before getting into the list of the top 3 ETFs in the Mid-cap segment, let's understand what Mid-cap is. What exactly is midcap?  Mid-cap companies haven't attained large-cap status, but they have a more substantial track record than small-cap businesses.   Their shares provide a perfect balance between the risks and benefits of their smaller and larger counterparts.  The market capitalization of a mid-cap company typically runs between $2 billion and $10 billion. As the name suggests, a mid-cap corporation sits halfway among large-cap (or big-cap) and small-cap businesses.  These businesses usually have a well-established business model and a strong presence in their respective industries, and they may see significant development as their market share expands.   Large-cap businesses are eager for mergers and acquisitions. However, past large-cap corporations that have shrunk in size and dominance are present in the mid-cap category.  Mid-cap stocks are low at risk, have low volatility, and have a lesser growth trajectory than small-cap stocks, but they are riskier, exhibit more turbulence, and have higher potential gains than large-cap firms.  For mid-cap equities, there are two key benchmarks The Russell Midcap Index is a subset of the broader Russell 1000 Index - it monitors roughly twice as many companies as more than 800.  The S&P Mid-Cap 400 Index measures the performance of 400 mid-sized corporations in the United States with market capitalizations ranging from $2 billion to $8 billion.  The top 3 recommendations in the mid-cap category ETFs  Rank ETF 1 Invesco Russell 1000 Dynamic Multifactor ETF 2 JPMorgan BetaBuilders U.S. Mid Cap Equity ETF 3 iShares Morningstar Mid-Cap Growth ETF  1. Invesco Russell 1000 Dynamic Multifactor ETF  The Russell 1000 Index's component securities’ rankings are given by OMFL based on their value, size, momentum, quality, and low volatility.  Oppenheimer uses a rules-based system based on fundamental economic statistics and global risk appetite to assess the current market cycle's state: growth, downturn, contraction, or recovery.   The fund adjusts its exposure to favor the elements that perform best in the current market. The aggregate factor score, adjusted by market cap, weights holdings.   By applying this dynamic overlay, OMFL takes advantage of the cyclical nature of factor performance. For this added benefit, the fund has a low price.  The MSCI ESG Fund Rating for Invesco Russell 1000 Dynamic Multifactor ETF is AA, with 7.67 out of 10. The MSCI ESG Fund Rating assesses a portfolio's long-term resistance to risks and opportunities posed by environmental, social, and governance variables  Performance  Performance [as of 14/03/22]1 year3 years5 years10 yearsOMFL1.79%17.46%--Russell 1000 Invesco Dynamic Multifactor Index2.08%18.04%-- The fund invests entirely in the USA.  OMFL Top 10 Holdings  Source: etf.com OMFL details  BrandInvescoExpense Ratio0.29%YTD Return-12.76%AUM$1.73BNumber of Holdings171Avg. Spread ($)$0.03Average Daily $ Volume$8.28M 2. JPMorgan BetaBuilders U.S. Mid Cap Equity ETF.  BBMC is a passively managed fund that tracks an index that tracks mid-cap firms across multiple sectors in the US stock market.   Although extensive and small-cap firms may be included, the index generally analyses firms between 85th and 95th percentile rank in market capitalization of the US investible universe.   Common shares, preference shares, and REITs are examples of equity securities. BBMC, part of the 'BetaBuilders' suite, provides plain-vanilla exposure to mid-cap stocks, which can be utilized as a core investment or complement BBUS and BBSC, respectively, covering the whole market and small-cap parts of the US equity market.   The fund will invest up to 20% in the future to track the index more closely. The index’s rebalancing is done every three months. The MSCI ESG Fund Rating of A for JPMorgan BetaBuilders U.S. Mid Cap Equity ETF is 6.01 out of 10.   The MSCI ESG Fund Rating assesses a portfolio's long-term resistance to risks and opportunities posed by environmental, social, and governance variables.  Performance  Performance [as of 14/03/22]1 month3 monthsYTDBBMC-5.53%-10.14%-13.71%MSCI USA Mid Cap Index-4.96%-9.73%-12.84% The fund invests only in the USA.  BBMC Top 10 Holdings  Source: etf.com BBMC details  BrandJPMorganExpense Ratio0.07%YTD Return-13.71%AUM$1.49BNumber of Holdings638Avg. Spread ($)$0.10Average Daily $ Volume$957.72K 3. iShares Morningstar Mid-Cap Growth ETF  IMCG is a growth-oriented, passively managed fund that invests in US midcap equities. Morningstar's index technique, which incorporates fundamental variables, is used to choose stocks.   This technique defines the selected growth companies as having above-average historical and anticipated income, revenues, equity, and operating cash growth.   The underlying index is recreated twice a year and quarterly rebalanced. Before March 19, 2021, the fund used the JKH ticker to track the Morningstar US Mid Growth Index. The MSCI ESG Fund Rating for the iShares Morningstar Mid-Cap Growth ETF is AA, with 7.27 out of ten.   MSCI ESG Fund Rating assesses a portfolio's long-term resistance to risks and opportunities posed by environmental, social, and governance variables.  Performance  Performance [as of 14/03/22]1 year3 years5 years10 yearsIMCG-6.11%15.48%15.81%13.25%MSCI USA Mid Cap Growth Index-8.62%14.87%13.46%12.67% The fund invests only in the USA.  IMCG Top 10 Holdings  Source: etf.com IMCG details  BrandiSharesExpense Ratio0.06%YTD Return-19.47%AUM$1.13BNumber of Holdings359Avg. Spread ($)$0.08Average Daily $ Volume$10.40M One should look out at these ETFs before investing in the mid-cap category in the USA. FAQs What is a mid-cap company? Mid-cap companies are those companies that have a market capitalization between $2 billion and $10 billion. What are the top 3 ETFs in mid-cap categories? Invesco Russell 1000 Dynamic Multifactor ETF JPMorgan BetaBuilders U.S. Mid Cap Equity ETF. iShares Morningstar Mid-Cap Growth ETF Are mid-cap stocks risky investments? Mid-cap stocks are low at risk, have low volatility, and have a lesser growth trajectory than small-cap stocks, but they are riskier, exhibit more turbulence, and have higher potential gains than large-cap firms.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

The expense ratio is one of the most vital aspects of ETF investing. However, many investors are unaware of the fact that a portion of your portfolio is allocated to a charge termed an expense ratio each year. It's critical to understand the costs you're paying no matter what you're investing in.  And, given the prevalence of mutual funds and exchange-traded funds (ETFs), many of us pay an annual expense ratio out of our portfolios. You'll learn what an expense ratio is, why it's essential, and how to spot a good one when you see one. What is an Expense ratio? An expense ratio is a fee that a mutual fund or exchange-traded fund charges investors (ETF). This charge covers the costs of management, asset allocation, marketing, and other services.   These fees calculation are done as a percentage of an investor's annual cost. ETF expense rates are usually less than 1%. That means you spend less than $10 per year on expenses for every $1,000 you invest.  "In the simplest terms, an expense ratio is a convenience fee for not having to pick and trade individual stocks yourself".  - Leighann Miko, certified financial planner (CFP) and founder of Equal Financial, explains expense ratio The expense ratio is the reward for the fund managers for supervising the fund's holdings and coordinating investment plans in actively managed funds.   Activities of the fund manager include time spent choosing and trading securities, reallocating the portfolio, processing payouts, and other procedures necessary to keep the fund up to meet its objectives.  The expense ratio encompasses license fees paid to significant stock indices for passive funds and ETFs that don't actively select investments and instead try to replicate the underlying index.  Calculation of expense ratio  Expense ratio = Total fund expenses / Total fund assets under management How do they work?  The expense ratio is expressed as a percentage of your fund investment. A fund, for example, might charge 0.30 percent. That implies for every $1,000 you put into the fund; you'll pay $3 per year.   If you own the investment for the entire year, you'll have to pay this. However, don't think you'll be able to sell your funds right before the end of the year and escape paying the fee.   The management company for an ETF will deduct the cost from the fund's net asset value daily, making it essentially undetectable to you.  What does a reasonable expense ratio look like?  According to experts, an expense ratio of < 2% is low and > 2% is considered high. The higher your expense ratio, the lower your returns will be.  As per Morningstar, the weighted mean expense ratio for ETFs in 2019 was 0.45 percent. That's less than 1/2 from what it was in 1999, and the trend is anticipated to continue. It's a matter of opinion on what defines a decent expense ratio for an ETF. Investors aren’t liable to pay hefty prices to invest in ETFs, and they should focus on ETFs with competitive and consistent expense ratios.  What else should you think when it comes to the expense ratio?  Experts advise looking for reduced-cost funds so you don't lose a lot of money in fees throughout your investment duration. It's not only the upfront costs; you're also losing the value of those assets as they compound.  Larger funds can frequently carry a lesser expense ratio because some expenditures, such as fund management, can spread over a more extensive asset base.  The smaller fund may need to charge more to break even, but as it expands, it may be able to lower its expense ratio to a comparable price.  Mutual funds may levy a sales load, which can be pretty high (up to a few percent) but is taken into account for the expense ratio. That's a different type of cost, and you must do everything you can to avoid funds that charge them. Major brokers provide many mutual funds with no sales load and low expense ratios. FAQs What is a good ETF expense ratio? According to experts, an expense ratio of < 2% is low, and > 2% is considered high. The higher your expense ratio, the lower your returns will be. Are ETFs expense ratios high? According to experts, an expense ratio of < 2% is low, and > 2% is considered high. The higher your expense ratio, the lower your returns will be. It’s a matter of opinion on what defines a decent expense ratio for an ETF. Investors aren’t liable to pay hefty prices to invest in ETFs, and they should focus on ETFs with competitive and consistent expense ratios. Is the expense ratio charged every day? If you own the investment for the entire year, you’ll have to pay this. However, don’t think you’ll be able to sell your funds right before the end of the year and escape paying the fee. The management company for an ETF will deduct the cost from the fund’s net asset value daily, making it essentially undetectable to you. Is expense ratio important in ETF? An expense ratio is a fee that a mutual fund or exchange-traded fund charges investors (ETF). This charge covers the costs of management, asset allocation, marketing, and other services. These fees calculation are done as a percentage of an investor’s annual cost. ETF expense rates are usually less than 1%. That means you spend less than $10 per year on expenses for every $1,000 you invest.  TALK TO AN EXPERT

When an ETF's Volatility is taken into account, an investor may find it challenging to determine which fund offers the best risk-reward ratio. Learn about the four most popular volatility metrics and how they're used in different types of risk assessments here. What is Volatility ETF? Volatility is a parameter of how quickly the price of a security fluctuates over time. It expresses the degree of risk linked with a security's price movements.   Investors and traders measure a security's Volatility to assess past price fluctuations and forecast future moves. Types of Volatility 1. Historical Volatility The historical volatility indicator shows how the price of the security has fluctuated. It helps to forecast future price fluctuations based on historical trends.  However, it does not provide insight into the future direction or trajectory of the security's price.  2. Implied Volatility This is the underlying asset's Volatility that will yield the theoretical value of an option equivalent (derivatives) to the option's current market price.  In option pricing, Implied Volatility is a critical factor. It offers a forward-looking perspective on potential price variations in the future.  Most popular volatility metrics Standard Deviation The standard deviation measures an ETF's Volatility or the likelihood for earnings to rise or fall dramatically over a short period. A volatile investment is one that poses a more significant risk since its performance can swing either way dramatically The standard deviation of an Exchange Traded Fund assesses this risk by determining how much the fund varies from its mean return. For example, a fund with a steady four-year return of 7% will have a mean, or average, of 7%. Since the ETF's return in any given year does not depart from its four-year mean of 7%, the standard deviation for such an ETF would be zero.   An ETF that returned -15%, 17%, 12%, and 20% in each of the previous four years, on the other hand, would have an average return of 8.5 percent.  This fund would also have a significant standard deviation because the fund's return departs from the mean return each year.  As a result, this fund is riskier because it swings back and forth between favorable and unfavorable returns in a short period. Beta While standard deviation measures a fund's Volatility based on the spread of its returns over time, beta, another relevant statistical measure, compares a fund's Volatility (or risk) to its index or benchmark.   When a fund's beta is very near to one, it suggests that its behavior closely resembles the underlying index or benchmark. A more extensive beta implies that the market is more volatile than the benchmark, whereas a beta below suggests that the fund is less volatile than the underlying benchmark Let's take a small example about the market; the lower the beta, the less susceptible the underlying instrument is. The QQQE has a beta of 1.04, according to ETF.com, which suggests that if the Nasdaq 100 rises by 1%, the ETF will climb by 1.04 percent. Investors who anticipate a bullish market may buy funds with high betas, increasing their chances of outperforming the market. If investors expect negative demand shortly, funds with a beta of less than one are a suitable pick because they might lose less than the benchmark.  R-squared The R-squared of a fund tells investors whether an ETF's beta is adequate compared to a benchmark.  R-squared explains the degree of association between a fund's fluctuation and market risk, or, more particularly, the extent to which a fund's variability results from the general market's day-to-day variations by calculating the relationship of a fund's movements to those of an index. R-squared values vary from 0 to 100, with 0 denoting no correlation and 100 representing complete correlation. If the R-squared value of a fund's beta is near 100, the fund's beta should be trusted.  An R-squared score near zero, on the other hand, shows that the beta isn't very relevant since the ETF is being evaluated to an inadequate benchmark. More than that, the beta will be skewed by an incorrect benchmark. Because alpha is determined using the beta, it's best not to trust the number provided for alpha if the fund's R-squared value is low. Alpha The amount of additional risk that enabled the ETF to outperform its matching benchmark is measured by alpha.  Using beta, alpha evaluates the fund's return to the risk-adjusted returns of the benchmark and determines whether the fund outperforms the market, being consistent in terms of risk. For instance, if a fund's alpha is one, it exceeds the benchmark by one percent. Negative alphas are wrong since they suggest that the ETF underperformed for the fund's investors' additional, fund-specific risk. These are some factors that should help you evaluate the risk associated with ETFs. However, one must also consider their risk appetite before investing. FAQs How do you calculate the volatility of an ETF? The standard deviation measures an ETF’s Volatility or the likelihood for earnings to rise or fall dramatically over a short period. A volatile investment is one that poses a more significant risk since its performance can swing either way dramatically. The standard deviation of an exchange-traded fund assesses this risk by determining how much the fund varies from its mean return. What is a good volatility ETF? The standard deviation of an exchange-traded fund assesses this risk by determining how much the fund varies from its mean return. For example, a fund with a steady four-year return of 7% will have a mean, or average, of 7%. Since the ETF’s return in any given year does not depart from its four-year mean of 7%, the standard deviation for such an ETF would be zero. An ETF that returned –15%, 17%, 12%, and 20% in each of the previous four years, on the other hand, would have an average return of 8.5 percent. This fund would also have a significant standard deviation because the fund’s return departs from the mean return each year. As a result, this fund is riskier because it swings back and forth between favorable and unfavorable returns in a short period. What is a good volatility percentage? The standard deviation of an exchange-traded fund assesses this risk by determining how much the fund varies from its mean return. For example, a fund with a steady four-year return of 7% will have a mean, or average, of 7%. Since the ETF’s return in any given year does not depart from its four-year mean of 7%, the standard deviation for such an ETF would be zero. An ETF that returned –15%, 17%, 12%, and 20% in each of the previous four years, on the other hand, would have an average return of 8.5 percent. This fund would also have a significant standard deviation because the fund’s return departs from the mean return each year. How does a volatility ETF work? A volatility ETF will move in the opposite direction to the popular stock market indices. When the stock market index moves up, the volatility ETF will decline. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Barclays made a substantial strategic attempt to build the ETF industry in 2000, launching over 40 new products under the iShares brand, backed by intensive education and marketing.   BlackRock bought the iShares brand and company from Barclays in 2009 and now manages a group of exchange-traded funds (ETFs). The listing of iShares funds London Stock Exchange New York Stock Exchange Hong Kong Stock Exchange iShares provides portfolio building blocks for small and large investors through the medium of ETFs. iShares offers more than 900 different investment products and has an AUM of over $ 3 trillion.  iShares provides a varied range of investment products based on strategies, assets, themes, goals, etc iShares has several ETFs and Mutual funds.   However, ETFs dominate the space. As of February 2022, iShares ETFs dominated the Market capitalization of the most significant exchange-traded funds (ETFs) worldwide. Blackrock iShares offers various investment products in ETF and mutual fund parlance. They include underlying assets of bonds, stocks, real estate, commodities, etc., in developed and emerging economies.   One of the unique traits of iShares is that it is a leading player in offering sustainable ETFs. iShares has been providing ESG-based ETFs for its investors. ESG funds are funds that have underlying securities of firms and countries which have passed rigorous  Requirements of being ESG compliant. Only assets with a high sustainability score are included; this would rule out sovereign bonds with unsound ESG track records.   An ESG in security selection leads to better-informed investment decisions, and sustainability funds may outperform non-sustainable funds due to superior risk management.   Companies having a lesser carbon footprint incur less regulatory scrutiny than others, thus making their stock stable over time.   Sustainable funds include ETFs classified as Screened ETFs mimic specific indices that eliminate the risk of exposure to certain areas of business. iShares ESG Screened S&P 500 ETF is an example of a screened ETF.   A broad ESG ETF is a group of ETFs that track ESG-compliant sectors, businesses, and indices. It has several subcategories.  Broad ESG ETFs screen sectors and indices based on their ESG compliance- having several subtypes, namely. Thematic ESG ETFs focus on one of the ESG themes of Environment, Social, or Governance. One such fund classification in thematic ESG is Carbon transition readiness.   These funds focus on companies and sectors that Blackrock feels are ready to work in a low carbon footprint economy. Impact funds generate sustainable outcomes alongside a financial return.  iShares also provides investors with a technologically superior core portfolio builder, which helps investors build their long-term wealth growth portfolio.   It also provides investors with ETFs based on various goals of wealth creation, income earning, active factor-based wealth creation, etc.  Income ETFs provide investors with two choices of ETFs One for yield Fixed income. Yield ETFs include ETFs in the likes of Equity Income ETFs, High Yield Bond ETFs, International Bond ETFs, Tax-Free Muni ETFs, Hybrid Security ETFs, Real Estate ETFs, and multi–Asset ETFs.   Fixed-income ETFs include ETFs like Core Bond ETFs, Investment Grade ETFs, Short Duration Bond ETFs, Tax-Free Muni ETFs, International Bond ETFs, Inflation-Protected ETFs, Interest Rate-Hedged ETFs, etc.  Along with ETFs, iShares also has a comprehensive collection of mutual funds that invest in asset classes like equities, bonds, real estate, etc. iShares mutual funds started as early as 1993, with the iShares S&P 500 index fund.   Some iShares Mutual Funds are Russell 1000 Large-Cap Index Fund iShares Developed Real Estate, Index Fund Short-Term TIPS Bond Index Fund iShares U.S. Aggregate Bond Index Fund, etc.   The bottom line is that whilst building a portfolio, neglecting iShares should not be the case.  FAQs What is an ETF? An ETF stands for exchange-traded fund (ETF). One single ETF is a basket of securities that can be bought and sold like mutual funds through a brokerage firm. ETFs track a specific index such as S&P, sector, commodity, or other assets. Much like stocks, ETFs can be traded on the market. Is an ETF better than a stock? Investing in an ETF is less risky than investing in a stock, as ETFs are diversified. In the case of ETFs, investors do not control what happens to the portions of the ETFs. ETFs have a diversified profile of assets, and the risk associated with the investment is reduced significantly. In stocks, the risk attached is higher as the stock price depends entirely upon the company’s performance and other exogenous factors of the world.    Does BlackRock run iShares? Blackrock is responsible for iShares ETFs and it is the largest asset manager in the world. Consult an expert advisor to get the right plan TALK TO AN EXPERT

The high volume of trading of an ETF can help us judge the three most traded ETFs in 2022. Let's understand ADTV or the Average Daily Trading Volume for an ETF.  What is ADTV or Average Daily Trading Volume?  Investors refer to the number of shares of a specific stock that change hands on average during a single trading day as Average Daily Trading Volume (ADTV). The average daily trading volume (ADTV) can be determined for five days, ten days, etc. The average trading volume for 20 or 30 days is a regularly used ADTV metric.  ADTV of a single stock, options on a stock, or market indexes like the Nasdaq 100 are all tracked.  The average daily value indicator is an alternative to the average daily trading volume indicator. The average daily value calculates the average dollar amount traded d  William O'Neil's 'How to Make Money in Stocks' popularized the use of average volume as one of several data sources for investing decisions.  O'Neil emphasized the importance of paying attention to ADTV for two reasons Ensure that a stock is liquid enough to trade fast. To ensure that stock traders' present supply and demand are on your side.  When a stock's price declines, its daily volume should be lower than the usual daily volume, indicating that selling pressure is easing. When a stock's price has been consolidated and isn't growing much, you would like to see increasing volume as the prices begin to rise, indicating more buyers are entering the market. When a stock's price increases, you want the increased volume to indicate that it will continue to rise. Three most traded ETFs based on three months of ADTV SymbolETFAvg Daily Share Volume (3mo)AUM in $ 1000sTQQQProShares UltraPro QQQ116,601,047$15,408,300.00SPYSPDR S&P 500 ETF Trust112,241,844$385,693,000.00UVXYProShares Ultra VIX Short-Term Futures ETF82,200,375$893,935.00 1. ProShares UltraPro QQQ Overview TQQQ is a leveraged fund that provides 3x exposure to NASDAQ 100 stocks over a one-day holding period. The underlying index contains 100 of the top non-financial listed companies on NASDAQ based on market capitalization.   Technology businesses have historically dominated TQQQ's underlying index; therefore, its future outcomes may have a strong connection to the tech industry.   The fund uses a quantitative approach to determine the type, number, and combination of investment positions that it expects to deliver daily returns commensurate with its investment objective.   The fund is a very short-term tactical vehicle and, like many levered products, is not a buy-and-hold ETF. The expense ratio of the ETF is 0.95%. Performance Performance [as of 03/02/22]1 year3 years5 years10 yearsTQQQ13.55%59.06%49.35%47.24%Nasdaq 100 Index9.84%26.86%22.73%19.72% 2. SPDR S&P 500 ETF Trust  Overview  SPY is the most well-known and oldest US-listed ETF, and it consistently ranks first in terms of AUM and trading volume. The fund tracks the S&P 500, a widely followed US index.   Few investors are aware that the S&P index committee selects 500 equities to reflect the US large-cap space, not usually the 500 most significant by market capitalization, resulting in occasional single-name absences.  Nonetheless, the index provides excellent coverage to the US large-cap market. It's worth noting that SPY is a unit trust, an older but still functional structure. SPY, as a UIT, must completely replicate its index (which it almost certainly would) and forego the negligible risk and return of securities lending.   It also can't reinvest portfolio income between distributions, resulting in a cash drain that hurts performance in rising markets but helps performance in down markets. SPY is a popular vanilla trading instrument. The ETF's expense ratio is 0.09 percent.  Performance Performance [as of 03/02/22]1 year3 years5 years10 yearsSPY14.81%17.98%14.97%14.49%S&P 500 Index14.94%18.06%15.06%14.61% 3. ProShares Ultra VIX Short-Term Futures ETF  Overview  UVXY is a commodities pool wrapper that provides daily leveraged exposure to short-term VIX futures, which are designed to capture the volatility of the S&P 500.   UVXY is a short-term trading instrument, not a long-term investment vehicle because it is a geared instrument with daily resets.   Returns for a holding period of more than one day, and frequently do, differ significantly from 1.5x. UVXY, like its others, offers scaled returns on the front and 2nd-month futures contracts rather than the VIX index itself.  Investors will receive a K-1 at tax time if they participate in a commodity pool, but they will eliminate the counterparty risk of an exchange-traded note. The fund provided 2x leveraged exposure before February 28, 2018. The expense ratio of the fund is 0.95%.  Performance  Performance [as of 03/02/22]1 year3 years5 years10 yearsUVXY-97.86%-83.44%-78.78%-85.05%S&P 500 VIX Short-term futures Index-58.07%-40.15%-- FAQs What is ADTV? Investors refer to the number of shares of a specific stock that change hands on average during a single trading day as Average Daily Trading Volume (ADTV). What is a high ADTV? An ADTV is high when more investors are interested in a stock and there is a high demand for it while a low ADTV means the stock is not in demand. What is the average daily volume indicator? Average Daily Trading Volume is an indicator that refers to the number of shares of a stock brought and sold on a trading day. What are the 3 most traded ETFs based on three months of ADTV? The 3 most traded ETFs are: ProShares UltraPro SPY SPDR S&P 500 ETF Trust UVXY ProShares Ultra VIX Short-Term Futures ETF TALK TO AN EXPERT

Louis Mayberg and Michael Sapir, both former Rydex workers, created ProFunds Group in 1997 with $100,000. It also introduced bear market inverse mutual funds that year.  ProFunds Group introduced ProShares, its first inverse exchange-traded fund, in 2006. The business created an exchange-traded fund that invests in Bitcoin futures contracts in October 2021.  ProShares created several ETF product strategies that are available to investors.  With more than $60 billion in assets, ProShares currently has one of the most extensive ETF line-ups. Dividend growth, interest rate hedged bonds, and geared (leveraged and inverse) ETF investing are all areas where the company excels.   ProShares continues to develop new solutions that give investors strategic and tactical options for increasing returns and managing risk.  The company also offers several Proshares ETFs Equity ETFs Non-equity ETFs.   What are Equity ETFs and Non-equity ETFs? Equity ETFs consist of dividend growers, thematic, rising rates, ex-sector, and factors. Non-equity ETFs have bitcoin-linked, interest rate hedged, alternative, and volatility.  ProShares is one of the few firms to provide geared ETFs, i.e., leveraged and inverse ETFs.   ETFs are of two categories: equity and non-equity   Equity ETFs are of types such as broad market, sector, international and thematic investing.   Non-equity ETFs are ones like fixed income, commodity, and currency ETFs. Proshares ETFs strategies are of seven types   Explore Dividend Growth   Thematic Opportunities  Eliminate an S&P 500 Sector  Gain Exposure to Bitcoin Returns  Hedge Against Rising Rates  Leveraged & Inverse Strategies  Opportunities in Market Volatility.  Let’s elaborate on them one by one.  1. Explore dividend growth strategy Aims to capture dividend-rich stocks as underlying assets. The hallmarks of the quality of a firm are evaluated by stable earnings, fundamentals, and a strong history of profit and growth.  The indicators of consistent dividend growth are company health, strong management and durability, and staying power. The ETF follows several dividend-aristocrats indices like the S&P 500® Dividend Aristocrats Index, Russell 2000 dividend growers ETF, MSCI EAFE, MSCI EM, etc.  2. ProShares Thematic ETFs Give investors access to firms at the forefront of trends that reshape our economy and reinvent our future. These include online retail, pet care, transformational changes, big data, nanotechnology, innovative materials, etc.  The Proshares ex-sector ETFs allow investors to eliminate specific sectors that the firm thinks will underperform from the underlying index; the S&P 500 ex-energy ETFs exclude oil, gas, and fuel sectors from the S&P 500. S&P 500 Ex-Financials ETF excludes banks, diversified financials, consumer finance, asset management, investment banking and brokerage companies, insurance companies, and REITs.   3. S&P 500 Ex-Health Care ETF Excludes pharmaceuticals, biotechnology and life sciences tools and services companies, health care providers, equipment and services companies.   4. S&P 500 Ex-Technology ETF Excludes information technology companies, including software and technology hardware and equipment, and semiconductor companies.  5. ProShares Bitcoin Strategy ETF (BITO) It is a novel U.S.-designed ETF to provide investors with an easy way to add bitcoin exposure to portfolios.   The ETF provides investors with a one-stop solution by eliminating the need to maintain separate accounts and wallets to manage bitcoin investments. It is regulated, unlike crypto, and is available all day to trade.  6. ProShares Investment Grade Interest Rate Hedged (IGHG) and ProShares High Yield—Interest Rate Hedged (HYHG) are corporate bond ETFs with an interest rate hedge built-in that aims for a duration of zero, effectively eliminating interest rate risk.  Since 2006, ProShares’ line-up of ETFs has helped investors use leverage to increase their buying power and inverse strategies to profit during or protect a portfolio from declines.   7. Leveraged ETFs Increase exposure to enhance profits and inversely do the same in the opposite direction, thus, providing a hedge against a company or a sector.   8. UltraPro QQQ leverage is some leveraged ETFs  Short QQQ,   Ultra-short QQQ  Triple inverse leveraged ETFs.   Volatility ETFs are for experienced investors who want to profit from losses in the predicted volatility of the S&P500, as defined by the pricing of VIX futures contracts, while also lowering their risk in their U.S. stock portfolio.   Some volatility ETFs are VIX Short Term Futures ETF, VIX Mid-term futures ETF, VIX Ultra short futures ETF and Short VIX short-term futures ETF.  FAQs What are Proshares ETFs? Louis Mayberg and Michael Sapir, both former Rydex workers, created ProFunds Group in 1997 with $100,000. It also introduced bear market inverse mutual funds that year.  ProFunds Group introduced ProShares, its first inverse exchange-traded fund, in 2006. The business created an exchange-traded fund that invests in Bitcoin futures contracts in October 2021. What are Equity ETFs and Non-equity ETFs? Equity ETFs consist of dividend growers, thematic, rising rates, ex-sector, and factors. Non-equity ETFs have bitcoin-linked, interest rate hedged, alternative, and volatility.  ProShares is one of the few firms to provide geared ETFs, i.e., leveraged and inverse ETFs. Is an ETF better than a stock? Investing in an ETF is less risky than investing in a stock, as ETFs are diversified. In the case of ETFs, investors do not control what happens to the portions of the ETFs. ETFs have a diversified profile of assets, and the risk associated with the investment reduces significantly. In stocks, the risk attached is higher as the stock price depends entirely upon the company’s performance and other exogenous factors of the world. TALK TO AN EXPERT

While analyzing investments, investors use a variety of financial measures. Before purchasing a security, it is vital to have a good understanding of the potential of an investment.   The beta parameter, used in fundamental analysis, is one of the most extensively used metrics.  Amongst the essential financial measurements, you've probably never heard of is beta. This article will explain beta in ETFs and how it affects your exchange-traded funds.  First and foremost, it is important to learn more about beta and how it affects stocks and ETFs.  The statistical metric beta is often used to analyze investments. It examines a stock's sensitivity to the larger market, which is commonly quantified by an index such as the Nasdaq 100, S&P 500, etc. The Direxion Nasdaq 100 Equal Weighted Index (QQQE) is one ETF that tracks the Nasdaq 100 Index.  Beta measures just how much security is likely to go up or down daily concerning the tracking Index. It is, in essence, a measure of a security market or systemic risk.   A stock with beta 1.0 swings in lockstep with the general market, that is, a 1% increase or decrease in the underlying index, in our case, the Nasdaq 100, is mirrored by a 1% gain or fall in the company's price.  Let us look at it with the help of a simple hypothetical illustration Source: EduFund Research Team As you can see, QQQE tracks the Nasdaq 100 perfectly, leaving the tracking error behind. The ETF perfectly mirrors the changes in the Nasdaq 100. However, this is not the case always. In our example, the beta is 1.  The lower the beta, the less susceptible the underlying instrument is to the market. The QQQE has a beta of 1.04, according to ETF.com, suggesting that if the Nasdaq 100 rises by 1%, the ETF will climb by 1.04 percent. This is because the ETF's fundamental driver composition differs from the index, it has a differing beta value.  According to Yahoo Finance, the Aberdeen Standard Physical Gold Shares ETF (SGOL) has a beta of 0.08, which means that if the S&P 500 rises 1%, the gold ETF will advance only 0.08 percent. Since the ETF's fundamental drivers differ from stock ETFs, it has a lower beta value.  As a result, putting together an investment portfolio with composite or blended beta value can be an effective risk management strategy. If the equity markets fall, an investor can place himself with downside protection with a beta of 0.08, the Global Beta Low Beta ETF, For example, has low market fluctuations than the S&P 500 because the index is re-weighted on a revenue basis and is designed to reflect the results of components from the S&P 500 with a minor beta comparable to the S&P 500.  GBA restricts each index element at 5% through quarterly rebalancing to mitigate concentration risk at the issuer level. Similarly, fixed-income ETFs have lower beta values than stock ETFs since bonds are less volatile than equities.   A bond ETF that invests in investment-grade bonds is the iShares Core U.S. Aggregate Bond ETF (AGG). It has a low beta, implying it is not affected much by market fluctuations.  Investors might also look for volatile ETFs with elevated amounts of market-related volatility. The SPDR S&P Emerging Markets Small Cap ETF, for example, invests in small-capitalization shares in emerging markets. This ETF has a higher beta value.  In financial analysis, beta can be a precious instrument. Depending on the investor's risk tolerance, statistics can assist in determining which stocks are generally steady and low or more volatile.   Investors who are risk-averse and would not want to be subject to higher risks (such as pensioners) should tend to favor ETFs with lower beta values in their portfolios.  Younger investors with a broader investing horizon, on the other hand, may prefer to own ETFs with greater beta values. Those ETFs are likely to have a higher risk-reward profile, making them a good option for youthful investors who have the luxury of time to ride out any losses. FAQs What is an ETF? An ETF stands for exchange-traded fund (ETF). One single ETF is a basket of securities that can be bought and sold like mutual funds through a brokerage firm. ETFs track a specific index such as S&P, sector, commodity, or other assets. Much like stocks, ETFs can be traded on the market. Is an ETF better than a stock? Investing in an ETF is less risky than investing in a stock, as ETFs are diversified. In the case of ETFs, investors do not control what happens to the portions of the ETFs. ETFs have a diversified profile of assets, and the risk associated with the investment is reduced significantly. In stocks, the risk attached is higher as the stock price depends entirely upon the company’s performance and other exogenous factors of the world.    Connect with an expert advisor to get the right plan for you TALK TO AN EXPERT

The key to understanding any concept is the often-neglected details. Thus, knowing the ETF creation and redemption process becomes of paramount importance. This process tells us how exchange-traded funds gain exposure to the market and the secret behind their affordability. Let's have a look at the ETF creation and redemption process ETFs creation process  The process begins with the ETF manager filing a plan with the competent authority.   For instance, the manager will file a project with the Securities and Exchange Commission (SEC) if in the USA or the Securities and Exchange Board of India (SEBI) in India. Once the approvals are in place, the ETF manager, often called a sponsor, agrees with the Authorized Party (AP). In some cases, the sponsor and the AP are the same entity.  Step 1:  The creation of exchange-traded funds starts with a party called an Authorized Participant (AP). An Authorized Participant can be a professional, financial institution, market maker, or a person with tons of money Step 2:  Now, it is the job of this Authorized Participant to get hold of all the assets or securities that the ETF wants to hold.  For instance, if the ETF tracks the Sensex, the Authorized Participant buys some quantity of all the constituent shares of the Sensex. Similarly, if the ETF tracks the Dow Jones Industrial Average, the AP will buy some shares of all the 30 companies that are a part of the index.  Step 3:  After that, the Authorized Participant will then deliver these to the Exchange Traded Fund. The Authorized Participant will get a block of ETF shares of equal value as payment for his services.   Usually, a block consists of 50,000 shares. The swap is a one-on-one fair value based on the NAV of the ETF share and not the market value. Both benefit from this transaction; the AP gets the ETF shares that he can resell for profit, and the ETF provider gets the stocks it needs to track.  Step 4:  The ETF shares received by the AP are listed in the secondary market and traded just like standard stocks.   ETFs redemption process  The redemption process can be associated with two people  The Authorized Participant  Retail investor. For the Authorized Participant, it will be as under:  Step 1:  The Authorized Participant buys the shares trading on the stock market.  Step 2:   The Authorized Participant will deliver the shares to the fund.  Step 3:  The ETF will give the underlying securities back to the Authorized Participant.  Step 4:  The Authorized Participant will then sell these securities in the stock market.  An investor can sell off his Exchange Traded Fund in two ways-  Sell openly in the stock market, the most chosen one.  Gather enough ETF shares to make a creation unit (mostly 50,000 units) and sell it back to the fund. Generally, only Institutional investors have this option open due to its higher costs. When the fund gets this creation unit, it is destroyed, and the underlying security goes back to the redeemer.   The study of this creation and redemption is crucial because it keeps the share price of the ETF near its underlying NAV, i.e., the Net Asset Value. Net Asset Value represents the fund's per share/unit price on a specific date or time.   For instance, if the ETF price falls below the NAV, the AP will interfere in the open market and buy up the ETF shares, raising its price and bringing it back to the level of its NAV. Similarly, if the ETF price increases well above its NAV, the AP will intervene and buy the underlying securities and sell off new ETF shares - bringing the price of the ETF shares back to its NAV value.  This arbitrage process is not perfect, but it helps contain the volatility of the ETF share price quite effectively. FAQs How is an ETF created?  Ans. When an ETF is created, a financial organization known as a sponsor purchases a selection of equities to represent the ETF's holdings. The sponsor issues ETF shares that reflect the value of the holding's portfolio once these shares are placed in a trust.  What is an example of ETF creation redemption?  Ans. The AP could sell the shares it was given when the ETF was created and earn a spread between the cost of the assets it purchased for the ETF issuer and the selling price from the ETF shares if the ETF is in high demand and trades at a premium.  What is the creation redemption process of ETFs and the function of authorized participants?  Ans. ETF shares are created through a process known as creation and redemption, which takes place in the primary market at the fund level. It permits authorized participants (APs), like licensed market makers, to trade a predetermined basket of securities, including cash, for a specific number of ETF shares.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In this article, we will discuss what are monthly resets. These leveraged ETFs reset daily and start each day afresh. However, that is not the most prudent strategy for an investor in the long run. Let's understand this, a very volatile market might have a lot of upswings and downswings, and thus, this might erode your holding.   Generally, leveraged ETFs have a negative bias.   Let's take an illustration:  Suppose an index starts at a 100-point mark and an investor has an ETF that replicates this index and also a 2x leveraged ETF. Now, let's assume that the index falls 10% daily. Daily change in the indexETF2x leveraged ETF 100100-10%9080+10%9996 So, you see that a leveraged fund will require a 12.5% change in the index to reach the initial level of 100, whereas the replicating ETF will require an 11.1% return to come to the initial level of 100.   Thus, a leveraged ETF will have a negative bias. Such leveraged ETFs are not suitable for a long-term investment, as choppy markets can essentially erode your investments. To mitigate this, the ETF firms came up with a monthly reset strategy such that the risks of a daily reset are avoided.  In a monthly reset option, ETFs provide a return every month rather than daily - which seems like a very appealing alternative to the daily reset issue. A monthly reset is not a better alternative but only a different option.   However, there's a catch to this reset. This reset happens only on a pre-specified day – usually on the first trading day of the month. Traders who purchase or sell on this specific day can take advantage of the ETF's leverage. Monthly reset products can yield different results than one-day reset products. The monthly reset may be advantageous in unstable markets, but in trending markets, the more extended reset period implies the fund may be under- or overexposed within the month.  Leveraged funds continue to transform and develop new techniques to maximize returns. However, all such methods have found no solution to the beta problem.  (β) decay on account of the daily resetting. The beta (β) of a leveraged fund is the ratio of the fund's realized cumulative return to the index's return in the same period. F is the leveraged return of the fund and X is the underlying index return.  Now, beta drift (BD) is the difference between the beta (β) and the ETF leverage denoted by L.  BD = β – L Now, this BD is also known as a beta decay because the β falls below the fund's leverage in the longer run. For a daily reset, this decay is on the higher side than the monthly reset.   In response to this, monthly resets have leveraged up to a fixed period, i.e., a month.  The bottom line is that a monthly reset is just another reset technique similar to a daily reset; in the long run, both types of ETFs share identical characteristics.   Such decay is present in both these ETFs and risk-averse buy-and-holds investors would not appreciate the same.   Volatile markets will wreak havoc on both these ETFs, and they are sure of underperforming compared to their underlying index in the long run due to the negative bias of these funds.  These options are great for an active investor, but due diligence before proceeding is necessary. FAQs What does it mean when an ETF resets? Most leveraged ETFs reset daily and start each day afresh. However, that is not the most prudent strategy for an investor in the long run. In a monthly reset option, ETFs provide a return every month rather than daily – which seems like a very appealing alternative to the daily reset issue. A monthly reset is not a better alternative but only a different option. However, there’s a catch to this reset. This reset happens only on a pre-specified day – usually on the first trading day of the month. Traders who purchase or sell on this specific day can take advantage of the ETF’s leverage. How often is the reset done for the majority of ETFs with resets? These leveraged ETFs reset daily and start each day afresh. However, that is not the most prudent strategy for an investor in the longer run. Let’s understand this, a very volatile market might have a lot of upswings and downswings, and thus, this might erode your holding. Generally, leveraged ETFs have a negative bias. When should I exit ETF?   An investor can sell off his Exchange Traded Fund in two ways-    Sell openly in the stock market, the most chosen one.    Gather enough ETF shares to make a creation unit (mostly 50000 units) and sell it back to the fund. Generally, only Institutional investors have this option open due to its higher costs. When the fund gets this creation unit, it is destroyed, and the underlying security goes back to the redeemer.  Do ETFs give good returns?   Investing in an ETF is less risky than investing in a stock, as ETFs are diversified. In the case of ETFs, investors do not control what happens to the portions of the ETFs.   ETFs have a diversified profile of assets, and the risk associated with the investment reduces significantly. In stocks, the risk attached is higher as the stock price depends entirely upon the company’s performance and other exogenous factors of the world.  TALK TO AN EXPERT

While you've seen how ETFs can be a good addition to your portfolio, there can be some risks associated with ETFs. Understanding any risks associated with your investment beforehand is always beneficial for you. Risks associated with ETFs Source: Freepik 1. Market risk   Often called systematic risk, this is the single most significant risk while investing in ETFs.   An ETF is a collection of its underlying securities. Thus, the movement of these securities in the stock market affects the ETF as well.   For instance, if an ETF is tracking the Sensex and it drops by 20%, nothing in the world can stop this ETF from also falling. No advantage of the ETF will harbor this fall but can cushion it, if not entirely prevent it.  2. 'See it before buying' risk  This type of risk is the second most significant risk associated with investing in ETFs. An investor should be very vigilant when choosing an ETF.   Given the current scenario wherein more than 7600 ETFs are trading in the stock markets worldwide, studying carefully and looking at its underlying assets before investing becomes a paramount prerequisite.  Several ETFs can be tracking the same sector but may vary considerably by their underlying assets.   For instance, an ETF tracking the pharmaceutical industry should follow next-gen pharma companies having innovation in R&D, along with a promising future.  Such an ETF will have a higher return compared to an ETF tracking the pharma sector (but not tracking such high-potential companies).   Hence, 'judging a book by its cover' risk becomes vital.  3. Counterparty risk  Counterparty risk is the probability that the counterparty in a transaction may not fulfill part of the deal and default on its obligations. An ETF can track the underlying index in two ways.   It holds the underlying securities   ETF swaps investor cash with a bank or financial institution for the index's performance.   The former is a physical ETF, and the latter is a synthetic ETF.   Both investments have a certain degree of counterparty risk, but the probability is minimal and somewhat higher in the second.   However, we must keep in mind that ETFs are extensively collateralized and safe.   4. Exotic-Exposure risk  As stated earlier, several types of ETFs are doing rounds in the market, including some very complex specialized ETFs like inverse ETFs and leveraged ETFs.   Such ETFs use complex strategies to invest money, which may not always pan out the way one hopes. Hence doing due diligence before investing in such exotic ETFs is indispensable.   Similar to ice cream, moving beyond traditional, plain, and time-tested flavors increases the risk of being left with a sour taste.  5. Shutdown risk  Several ETFs are floating on global markets, but the investors love not all; hence some close down! About 100 ETFs close down every year, thus leaving their investors high and dry.   When an ETF is closed down, the investors get compensation in cash after liquidating the fund's holdings. However, this isn't an enjoyable experience in general.   Improper tracking of records on the part of the fund can lead to several grievances and, most importantly, mental agony for the investor.  6. Hot-new-thing risk  ETFs launched with such pomp trick investors into subscribing to such ETFs without doing their due diligence. This risk needs to be countered by the investor's conscience.  One must thoroughly study the underlying assets and the tracking methodology without bias of the splendors advertising.   According to ETF.com, a rule of thumb is that the investment amount in an ETF should be inversely proportional to the press it gets.  7. Tax risk  ETFs can have different structures and strategies, resulting in differentiated tax liabilities.   Some ETFs may use an in-kind exchange mechanism and thus have lower capital gains tax liability than those that use complex derivatives to track the underlying index.   Therefore, this can hamper the investor's profits and tax non-tax liabilities. Unless an investor is entirely aware of the fund's work, they may be caught off-guard.  8. Trading risk  ETFs are listed on the stock markets and can be traded just like a regular stock; this comes with its own set of liquidity risks. An ETF might not be very liquid, thus casting a shadow over its trading ability; it's the first advantage.  An ETF having a small spread between bid prices is how to tackle this illiquidity problem. Some ETFs open with pomp and with time lose their sheen; thus, the illiquidity problem could set in.   Investors must vary of such ostentatious display by the ETFs - often called a Crowded- Trade risk but is related to trade ability risk.  ETFs deliver what they promise to deliver; reading the fine print is what differentiates an investor from a good investor FAQs What are the risks associated with ETFs? Here are some of the main risks associated with ETFs Market risk 'See it before buying' risk Counterparty risk Exotic-Exposure risk Shutdown risk Hot-new-thing risk Tax risk Trading risk Are ETFs riskier than funds? The degree of risk depends on the fund and ETF. Some are low-risk, medium, and high. It's best to consult a professional before investing. What are the pros of investing in ETFs? The benefits of investing in ETFs are: Lower expense ratiosDiversification (similar to mutual funds) Tax efficiency Easy to trade just like stocks What is the biggest risk associated with ETFs? The biggest risk is a Market risk. If you buy S&P 500 ETF and the S&P 500 goes down then the loss is inevitable. How to choose the best ETF in India? Here are some checkpoints to complete before choosing the best ETF in India: Liquidity: How easy is it to withdraw your money from any given ETF Expense Ratio: What is the cost of managing the ETF and how much percentage would you have to pay? Tracking errors in any ETFs Check past performances and returns of the ETFs you will be investing in Is ETFs worth investing? A fantastic way to vary your investment portfolio is with an ETF. Whenever you participate in the stock market, you have a finite amount of equity options Consult our expert to discuss the right plan for you. TALK TO AN EXPERT

You have seen various aspects of ETFs now; you must focus your attention on how to buy ETFs.   ETFs are intangible and transactions cannot take place in a store or a supermarket. Hence, specialized processes are in place to buy ETFs. How to buy ETF in India?   1: Open a brokerage account This type of account can be used to buy and sell securities like stocks, ETFs, commodity derivatives, etc.  The broker acts as a custodian for all securities. He also serves as an intermediary between the stock market and the investor. Hence, having a brokerage account is a prerequisite, resulting in a hassle-free online process.  There are different types of brokerage accounts, depending on the investor and his goals. Some prominent types are as follows- Various brokerage services are available like   Fidelity  Merrill Edge   Zacks   Trade etc.   You must select a broker based on specific parameters-  Fees - An investor must look at the fee policy of the broker before opening a brokerage account.   Look at how the broker charges for administration, maintenance, and stock trading commissions.  Minimum deposits - Some brokers have a minimum balance condition for opening an account.   However, for ETFs, it's just the cost of one ETF share. Low or no minimums are desirable.  Types of securities - Not all brokers will allow all types of securities to be tradeable on their platform. Thus, looking at the types of assets that can be traded becomes vital.  Customer service - The responsiveness and grievance redressal mechanisms of the broker should also be studied.  Now that you have chosen a brokerage account, you must have a clear ETF investment strategy. There are thousands of ETFs available on the market.  The investor must be clear of his goals and invest in an ETF that fulfills such aspirations.   Stock ETFs offer more incredible growth but at the same time have high volatility and risk.   Bond ETFs are comparatively less risky and provide fewer returns.  Thus, the realization of a golden balance based on investors’ needs is necessary. As per investment management firm T. Rowe Price, the asset allocation for retirement based on the investor’s age should be AgeStocksBondsCash or Cash Equivalents20s to 30s90%-100%0-10%-40s80%-85%0-20%-50s65%-85%15%-35%-60s45%-65%30%-50%0-10%70+30%-50%40%-60%0-20% Once the investor has decided upon his investment strategy, they should focus on the ETFs. And should research the various types of ETFs available in the market. The investor should look into a couple of aspects like  Expense ratio - Expenses eat into the investor's profits: the lower the expense ratio, the better.   Also, an investor must look at the fees an ETF charges for maintaining the portfolio. In most cases, ETFs have low to nil fees compared to actively managed funds as ETFs generally trace an underlying index.   However, an investor must be vigilant when buying specialty ETFs.  Volume- ETF volume shows the trading ability of the ETF and, thus, the liquidity. Higher the volume, the lower the spread, and the higher the liquidity.  Underlying Holdings- Look at the underlying holdings of the ETF.   Performance- Look at the fund's past performance and compare that to its peers.   Market price- Ideally, an ETF should trade near its NAV. Investors should keep in mind the NAV before making any purchases.   2: Buying the ETF At the very outset, the investor must transfer funds into the brokerage account with which the purchase takes place.  After ensuring sufficient funds, the investor must search for the ETF ticker symbol and place the buy order. The investor also needs to mention the number of ETF shares he wishes to purchase.   Generally, trading ETF infractions is not possible.  Confirm the order. Sit back and relax. Once an investor purchases the shares, they also need to make an exit strategy to minimize losses (if any) or minimize capital gains taxes.  FAQs How to choose the best ETF in India? Here are some checkpoints to complete before choosing the best ETF in India: Liquidity: How easy is it to withdraw your money from any given ETF Expense Ratio: What is the cost of managing the ETF and how much percentage would you have to pay? Tracking errors in any ETFs Check past performances and returns of the ETFs you will be investing in Is ETFs worth investing in? A fantastic way to vary your investment portfolio is with an ETF. Whenever you participate in the stock market, you have a finite amount of equity options. What are some advantages of ETFs? Some of the biggest advantages of ETFs are: Diversification and global stock exposure Trading flexibility Low costs Transparency Tax efficiency Risk management Professional management What are some disadvantages of ETFs? Some of the biggest disadvantages of ETFs are: Additional charges like Hidden fees, trading fees, and operating fees Lack of liquidity Tracking errors lower interest yields. Consult an expert advisor to get the right plan TALK TO AN EXPERT