11 Popular Types of ETFs (ETF Categories & Themes)

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ETFs are a relatively new investment instrument. The first ever ETF was created in 1993.

Because of their versatility, ease of use, and benefits, they have increased in popularity fast.

In this article, you will learn about all the popular types of ETFs as well as dozens of other ETFs at the very end of the article.

1. Stock ETFs

Popular stock ETFs
  • Vanguard S&P 500 ETF (VOO)
  • SPDF S&P 500 ETF (SPY)
  • Invesco QQQ (QQQ)

Stock ETFs (also known as equity ETFs) track major stock market indexes such as the S&P 500, Dow Jones Industrial Average, and Nasdaq.

The largest and most popular ETF in the world is the SPDR S&P 500 ETF, which trades under the symbol SPY.

SPY tracks the S&P 500 index. This simply means the ETF owns all of the stocks included in the S&P 500—which happens to be about 506 stocks (this changes occasionally).

Index ETFs are perfect for investors because they give your portfolio exposure to a wide range of stocks with a single purchase.

For example, by owning a single share of the SPY ETF (or any other S&P 500 ETF) you are essentially adding 500 of the largest U.S. company stocks to your portfolio.

2. Sector and industry ETFs

Popular sector and industry ETFs
  • Vanguard Consumer Staples ETF (VDC)
  • Fidelity® MSCI Materials ETF (FMAT)
  • iShares Exponential Technologies ETF (XT)

Sector and industry ETFs allow you to diversify your portfolio with stocks across multiple sectors and industries.

For example, let’s say you want your portfolio to gain exposure to the pharmaceutical and technology sectors. However, you don’t want to buy dozens of stocks from companies in those sectors.

You could simply buy pharmaceutical and technology ETFs and you would immediately gain exposure to those sectors.

Sector and industry ETFs also allow you to diversify your portfolio better.

For example, say you only invest in technology stocks like Apple, Amazon, and Facebook. It’s not that these are bad stocks to own. But your portfolio is only made up of stocks in one sector—technology—and that’s a problem.

If the technology sector is down, your entire portfolio will also be down.

Instead, the better thing to do would be to purchase ETFs across multiple sectors and industries. This way, if one industry is down, your entire portfolio isn’t down because you have stocks in other industries that are up.

For a full list of market sectors and industries, check out this list here.

3. Commodity ETFs

Popular commodity ETFs
  • SPDR Gold Trust (GLD)
  • iShares Silver Trust (SLV)
  • United States Oil Fund (USO)

A commodity ETF tracks specific commodities

A commodity is a raw material or agricultural product that can be bought and sold. Examples of a commodity include gold, oil, coffee, wheat, rice, or livestock.

When you purchase a commodity ETF, you do not own the underlying commodity itself. For example, if you bought a gold ETF, you are investing in gold, but you don’t get a physical gold bar shipped to your house.

Instead, when you purchase a gold ETF, you are purchasing a derivative contract that follows the price of gold.

A derivative contract essentially allows you to invest in a commodity, such as gold, without setting up a gold mine in your backyard.

4. Style ETFs

Popular style ETFs
  • iShares Core S&P 500 ETF
  • Vanguard Growth ETF
  • iShares iBoxx $ Investment Grade Corporate Bond ETF

Style ETFs track a specific investment style, asset class size, or asset class style.

I know that may be a little confusing, so let’s break it down.

First, let’s talk about investment style.

An investment style is a set of guidelines used to build your investment portfolio. For example, it’s not uncommon to see investment styles categorized by risk tolerance.

Risk tolerance refers to how much you are willing to risk to grow your portfolio. Risk tolerance is usually categorized as one of the three: conservative, moderate, or aggressive.

Aggressive portfolios tend to invest heavily in equities (stocks), whereas conservative portfolios invest more in fixed-income and debt (bonds, CDs).

Investment styles can also be categorized by type of stocks. For example, growth stocks versus value stocks.

Growth vs. value refers to the stocks in your portfolio and whether they are growth stocks or value stocks. You can learn more about different types of stocks in our stock investing guide.

And finally, market cap (short for market capitalization) refers to the size of the companies you are investing in. They could be large-cap, mid-cap, or small-cap.

Asset class style

The asset class style is referring to the type of stock and it’s growth potential. There are three primary asset class styles:

  • Growth — Growth stocks are stocks from companies that are expected to grow rapidly. An example of this is Amazon, Netflix, and Facebook.
  • Value — A value stock is from a company that operates in a stable industry and is not expected to grow or lose value quickly. Think companies like Bank of America, Proctor & Gamble, and Walmart.
  • Blend — A mixture of both growth and value stocks.

Asset class size

Asset class size refers to the size of the companies you are investing in. They could be large-cap, mid-cap, or small-cap.

Large-cap stocks include large companies like Apple, Amazon, and Google. Some examples of small-cap stocks are Papa Johns, Tupperware Brands Corp, and Fastly.

5. Bond ETFs

Popular bond ETFs
  • iShares Core US Aggregate Bond ETF (AAG)
  • Vanguard Total Bond Market ETF (BND)
  • iShares Core Total USD Bond Market ETF (IUSB)

A bond ETF is a type of exchange-traded fund (ETF) that invests in bonds. Simple enough, right? But what is a bond?

A bond is basically a loan from you to the issuer. The issuer could be a company, the Federal government, or a local government.

Bonds are issued to raise money. When you buy a bond, the issuer agrees to pay you back in full with additional interest. Depending on the bond’s length, interest is paid out monthly, quarterly, and at the time of maturity.

Bonds are a way for companies to raise money without giving up ownership of the form of stock.

There are many types of bonds. For example, corporate bonds, government bonds (also known as Treasury bonds), municipal bonds, high-yield bonds, and more.

Okay, so now you know what a bond is. Why invest in bond ETFs? There are many reasons, but the primary reason is liquidity.

Bond ETFs give you immediate access to the bond market with the ease and liquidity of stock trading.

You see, if you buy individual bonds the traditional way, you can’t buy them on the stock market. Instead, they are sold by a bond broker. 

When you buy bonds from a bond broker, they are subject to maturity dates. This basically means you cannot sell the bond until it reaches a specified date ranging from a month to 10+ years. This makes them very illiquid investments.

In contrast, a bond ETF is not subject to maturity because they trade on the stock market. This means you can buy and sell them throughout the day, just like stocks. Plus, you’ll still reap the benefits of interest payments.

6. Inverse ETFs

Popular inverse ETFs
  • ProShares Short S&P 500 (SH)
  • ProShares UltraPro Short QQQ (SQQQ)
  • ProShares UltraShort S&P500 (SDS)

Also known as short ETFs and bear ETFs, an inverse ETF seeks to capitalize from the declining price of a stock or other investment.

When an investor “shorts” a stock, it basically means they are betting against it. You may have heard the phrase buy low sell high when referring to stocks. A short seller takes the exact opposite approach to make money.

Instead, they are looking to borrow shares of a stock when it’s high with the hope of repurchasing them at a lower price for a profit.

An inverse ETF takes the same concept, except instead of shorting stocks, the ETF bets on the direction of a stock price using futures contracts.

A futures contract is just an agreement to buy or sell an asset at a future date and a specified price.

This video explains the futures market perfectly:

7. Actively managed ETFs

Popular actively managed ETFs
  • WCM/BNY Mellon Focused Growth ADR ETF (AADR)
  • AdvisorShares Accuvest Global Opportunities ETF (ACCU)

Actively managed ETFs combine the benefits of a mutual fund with an exchange-traded fund (ETF).

A mutual fund is almost identical to an ETF in that it’s a fund that holds a basket of individual investments.

Where a mutual fund starts to differ is that it’s actively managed by a manager who makes decisions on how to invest the fund’s money. ETFs do not have a manager. That is until now.

Actively managed ETFs give you the flexibility to buy and sell shares of the ETF on the stock market. But unlike most ETFs, an actively managed ETF does have a management team that makes investment decisions.

Popular actively managed ETFs: WCM/BNY Mellon Focused Growth ADR ETF (AADR), AdvisorShares Accuvest Global Opportunities ETF (ACCU)

8. Dividend ETFs

Popular dividend ETFs
  • Vanguard Dividend Appreciation ETF (VIG)
  • ProShares S&P 500 Aristocrats (NOBL)
  • SPDR S&P Dividend ETF (SDY)

Dividend ETFs are ETFs made up of dividend-paying stocks.

Shares of a dividend stock come from companies that make regular quarterly payments to shareholders. These payments are taken from the company’s profits.

Investors looking to earn passive income will invest in dividend stocks. Many investors live off the dividend payments alone, earning well over six figures per year.

A dividend ETF not only offers you a regular income from dividends, but it also adds instant diversification to your portfolio.

Unlike investing in individual dividend stocks, a dividend ETF offers a straightforward solution to getting exposure to multiple dividend stocks all in one.

9. Real estate ETFs

Popular real estate ETFs
  • Vanguard Real Estate ETF (VNQ)
  • iShares Cohen & Steers REIT ETF (ICF)
  • JPMorgan BetaBuilders MSCI US REIT ETF (BBRE)

Real estate ETFs aim to track the performance of the real estate sector.

When you purchase a real estate ETF, you don’t actually own any physical real estate. Instead, real estate ETFs contain REITs.

REIT stands for real estate investment trust. A REIT allows you to invest in real estate without all the work typically involved with building and managing physical properties.

In other words, you get the benefits of real estate investing without all the headaches.

REITs are also required by law to payout at least 90% of its taxable income each year in the form of dividends. Similar to dividend stocks, REITs can give you consistent passive income.

Like any ETF, real estate ETFs give your portfolio instant diversification because they invest in a bundle of REITs instead of just one or two.

10. Currency ETFs

Popular currency ETFs
  • Invesco DB US Dollar Index Bullish Fund (UUP)
  • Invesco CurrencyShares® Euro Currency Trust (FXE)
  • Invesco CurrencyShares® Japanese Yen Trust

Currency ETFs are built with the goal of providing you exposure to the foreign exchange market (forex).

The foreign exchange market is a place where you can trade currencies. For a detailed explanation of how this all works, check out this video:

In any case, a currency ETF allows you to diversify your portfolio by investing in currencies without the hassle of placing individual trades on the forex market, which can be quite confusing for most.

11. Foreign market index ETFs

Popular foreign market ETFs
  • Vanguard FTSE All-World ex-US ETF (VEU)
  • Vanguard Total International Stock ETF (VXUS)
  • iShares MSCI ACWI ex-U.S. ETF (ACWX)

Foreign market index ETFs allow you to invest in international stock market indexes.

If you wish to further diversify your portfolio with companies outside of the U.S., these ETFs make it easy.

Using this list here, you can even invest in country-specific ETFs including Africa, Asia, Australia, Brazil, India, and many more.

12. Other ETFs

At this point, you’re probably aware that there is an ETF for just about everything.

In this section, I want to list out a number of other ETFs you can invest in other than the main types listed above.

Other types of ETFs:

  • Volatility ETF
  • Tax-Deferred ETF
  • Alternatives ETF
  • Artificial intelligence ETF
  • Blockchain ETF
  • Marijuana ETF

Types of socially responsible ETFs:

  • Carbon intensity ETF
  • Fossil fuel reserves ETF
  • Water stress ETF
  • Energy efficiency ETF
  • Alternative energy ETF
  • Green building ETF
  • Pollution prevention ETF
  • Water sustainability ETF
  • Affordable Real Estate ETF
  • Education ETF
  • Major Disease Treatment ETF
  • Healthy Nutrition ETF
  • Global Sanitation ETF
  • SME Finance ETF
  • Human Rights Violations ETF
  • Labor Rights Violations ETF
  • Customer Controversies ETF
  • UN Principles Violations ETF
  • Catholic Values ETF
  • Sharia Compliant Investing ETF
  • Adult Entertainment ETF
  • Alcohol ETF
  • Gambling ETF
  • Nuclear Power ETF
  • Tobacco ETF
  • Weapons Involvement ETF
  • Firearms ETF
  • Predatory Lending ETF
  • GMO Involvement ETF

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