The Different Types of ETFs

ETFs started with ETFs that track the basic indexes.  ETFs can now be purchased that contain a specific sets of rules to buy and sell.  Furthermore, ETFs can be purchased where an ETF manager is buying and selling securities on behalf of the owners of the ETF.

With this, investors will have to decide which strategy fits his/her best.  The MER, management expense ratio will vary greatly depending on the ETF type, furthermore, there is no guarantee that the history will be the future results.

Index tracking ETFs – Copies what is in the main indexes

Smart beta ETFs – Holds securities based on a specific set of rules

Actively managed ETFs – A fund manager buys and sells to try to beat the index

Advisor series ETFs – ETFs that have an extra 1% MER/year attached to pay the advisor for his/her services.  The 1% is a standard fee, and I have not seen a lower or higher fee on any other ETFs.

ETFs with a Beta less than 1 will fluctuate less than the overall market, but the returns are usually less than the overall market.  Furthermore, ETFs with a Beta greater than 1 will fluctuate more than the overall market, but the returns are usually greater than the overall market.  ETFs with a negative Beta moves in the opposite direction of the overall market.

I have a mix of both in my portfolio.  Safe investing resulted in minimal returns while the more volatile investing strategy resulted in greater returns.  Of course, the risk of loss is much greater in the process with the more volatile investing strategy.

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