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What is an ETF?

An Exchange Traded Fund (ETF) trades like a stock, but isn’t a stock. Let me explain…

Buying an ETF is like buying a Greek salad. When you buy a Greek salad, you get everything that makes up the salad. Inside you may find sliced cucumbers, tomatoes, onions, olives, maybe some bell peppers and feta cheese. All of these ingredients put together is what makes up the salad.

An ETF works in the same way. When you buy one, you’re getting everything that makes up the fund. ETFs are great because there’s is one for every type of investor.

Here are some types of ETFs you can buy:

  • Leveraged ETFs

  • Passive ETFs

  • Active ETFs

  • Currency ETFs

  • Index ETFs

  • Bond ETFs

  • Industry ETFs

  • Commodity ETFs

  • Inverse ETFs

The list goes on.

There are index fund ETFs that track indexes like the S&P 500 or the Dow. There are dividend ETFs that include high-yielding dividend stocks or even stocks with a history of dividend increases. There are even ETFs that buy only in emerging markets or invest in only Artificial Intelligence companies.

In other words, there’s an ETF for pretty much everything you can think of. They’re great for increasing your level of diversification. And they’re especially great for the average investor who couldn’t care less to do any stock analysis and wants a more “hands off” investing approach.

EXAMPLES OF DIVIDEND ETFs

U.S. Investors

Vanguard High Dividend Yield ETF (VYM)

Vanguard Dividend Appreciation Index Fund ETF (VIG)

Schwab US Dividend Equity ETF (SCHD)

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

Vanguard Real Estate Index Fund ETF (VNQ)

iShares Core Dividend Growth ETF (DGRO)

Canadian Investors

Vanguard FTSE Canadian High Dividend Yield Idx ETF (VDY)

iShares S&P/TSX Cdn Div Aristocrats Idx ETF-Com (CDZ)

BMO Canadian Dividend ETF (ZDV)

iShares S&P/TSX 60 Index ETF (XIU)

Vanguard US Dividend Appreciation Index ETF (VGG)

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