Exchange traded funds (ETFs) are investments vehicles, like mutual funds, that their assets are traded in an exchange like a stock. If somebody buys a stock of an ETF it is like buying a small representative portion of all the fund assets. There are ETFs for almost every kind of investment someone can think of. Index ETFs are tracking the stocks of a particular index. For example SPY is the symbol of the ETF that tracks the index S & P 500, which includes 500 stocks. If someone buy a share of SPY it is like having a small portion in all 500 companies of S & P 500.
There are also ETFs that track gold, silver and other precious metals, agricultural products, other countries’ stock indices (Brazil, Greece, China, etc), sector indices like financials or solar panels manufacturers, currencies like the Euro or the pound and generally almost everything can be found as an ETF.
Index or sector ETFs provide diversification and diminish the devastating consequences of a particular company bankruptcy. Technical analysis in ETFs’ charts is the same as in stocks’ charts.
Regular ETFs are simply tracking an asset or an index. Buying shares of the ETF is like buying portion of the asset/index.
Leveraged ETFs are also tracking an asset or an index but when the asset/index rises 1% the ETF rises 2% or 3%, depending on the leverage. The table below contains some well known regular and leveraged index ETFs.
Inverse & leveraged ETFs
Inverse ETFs are tracking an asset or index inversely. If the asset/index rises 1% the ETF falls 1%. If the ETF is simultaneously inverse and leveraged then it will fall 2% or 3% depending on the leverage. So instead of short sell an index ETF we can buy its inverse. The table below contains some well known inverse and inverse-leveraged index ETFs.
Inverse ETFs have different prices from their counterpart so they can be useful to traders/investors with different risk profiles.