ETFs can offer investors Targeted market exposures, such as certain asset classes, sectors, or investment themes Potential tax efficiency Potentially lower expense ratios than many mutual funds Tradability throughout the day on an exchange Low minimum purchase amount, which is the cost of one share and could vary

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ETFS Education

Q: What are the different types of ETFs I can invest in?

Fixed Income Commodity Equity Specialty Sustainable

Q: What is the difference between an ETF and a stock?

An ETF is an investment product that tracks the performance of a basket of securities. An ETF can have exposure to stocks, bonds, commodities or currencies. A stock signifies an ownership position, or equity, in a particular corporation, and represents a claim on its proportionate share in the corporation�s assets and profits.

Q: What are the tax advantages to investing in ETFs?

ETFs often offer greater tax efficiency relative to many mutual funds. ETFs trade on an exchange, and capital gains are taxed according to the gain or loss when sold. Mutual funds may pass on taxes on gains that occur within the fund, even if no sales of the fund take place.

Learn about investing in ETFs

Understand the basics of ETFs

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ETFs? tab 1 of 3 selected Why invest in
ETFs? tab 2 of 3 Things to
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What are ETFs?

ETFs are a pool of securities sold in shares that trade throughout the day, like stocks. They are professionally managed, like mutual funds, and can provide portfolio diversification, especially over single stocks. Unlike mutual funds, there are no minimum purchase requirements for ETFs and they are generally more tax-efficient investments than mutual funds.

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See what ETFs can do for your portfolio and learn about possible risks.

ETFs Can Offer Investors

Targeted market exposures, such as certain asset classes, sectors, or investment themes
Potential tax efficiency
Potentially lower expense ratios than many mutual funds
Tradability throughout the day on an exchange
Low minimum purchase amount, which is the cost of one share and could vary

Know the Risks Associated with ETFs

ETFs are exposed to the investment risks associated with the underlying securities of the index

ETF investing involves expenses like fund expense ratios, trading-related costs and potential commissions for purchases and sales in certain account types

The fund's holdings may not exactly duplicate the composition of the index, and therefore performance of the fund may not match the index

ETFs that employ sophisticated trading strategies such as the use of leverage may not be suitable for all investors

Certain ETFs with unique exposures (like foreign indexes and commodities) entail unique risks that investors should review through the Prospectus

Investors Should Consider

The underlying index benchmark of the fund and its tracking error
Liquidity, average number of traded shares and the assets under management of the fund
Manager tenure and track record
Costs, especially expense ratio, as described in the prospectus

What are the different types of ETFs I can invest in?

Fixed Income

Fixed income funds are bond funds whose shares are listed on a stock exchange and traded throughout the day. There are funds focusing on corporate, government, municipal, international and global debt, as well as funds that track the broader Bloomberg Barclays Aggregate Bond Index. Investors can also purchase bond ETFs that focus on specific ranges of maturity dates.

Commodity

Commodity funds are homogenous goods often traded in bulk on exchanges, such as oil or grain. They are usually sold through futures contracts, which are priced based on supply and demand for that material, or in ETFs, which are more readily available and based on those contracts.

Equity

Equity ETFs are funds that invest in the stocks of U.S. or international companies rather than investing in bonds.

Specialty

Specialty funds, or sector funds, and ETFs that focus on specific industries or markets.

Sustainable

Sustainable funds are funds whose shares use environmental, social and corporate governance (ESG) criteria to evaluate investments or assess their social impact.

Common questions about ETFs

If you're looking for more information, check out these responses to some of the common questions investors have about ETFs

Expand all

What is the difference between an ETF and a stock?

How could fees and expense ratios affect returns?

With mutual funds and exchange-traded funds (ETFs), there are two primary sources of fees. Both kinds of funds charge what's called an expense ratio, an annual fee that covers the fund's management, administrative costs and marketing expenses. In addition, with mutual funds you could pay a sales load, a commission that a broker gets when you buy a fund (front-end load) or sell it (back-end load). While there is not sales load with an ETF, a broker may charge a commission on its purchase or sale.

What other costs are involved in buying or selling a fund?

ETF prices fluctuate according to supply and demand, which isn't likely to affect your costs significantly if you're trading a fund that tracks a major index. More specialized ETFs that trade less frequently may have a wider "bid-ask spread" (the difference between the price sellers want and what buyers are willing to pay). That spread will be evident when you place an order. You could end up buying at a relatively high cost or selling at a low one, which could add to your costs.

What are the tax advantages to investing in ETFs?

Want to learn more about ETFs?

Whether you're looking to understand the basics of ETFs or you're ready to dive into the technicalities, Merrill has the educational resources for you.

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Investing involves risk including the possible loss of principal investment.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Diversification and asset allocation do not ensure a profit or protect against loss in declining markets.

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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured	Are Not Bank Guaranteed	May Lose Value
Are Not Deposits	Are Not Insured by Any Federal Government Agency	Are Not a Condition to Any Banking Service or Activity

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With Merrill Edge Self‑Directed, get unlimited free online stock, ETF and option trades with no trade or balance minimumsFooter footnote ^b

Options contracts and other fees may applyFooter footnote ^a

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Other fees may apply. Free and $0 means there is no commission charged for these trades. $0 option trades are subject to a $0.65 per-contract fee. Sales are subject to a transaction fee of between $0.01 and $0.03 per $1,000 of principal. There are costs associated with owning ETFs. To learn more about Merrill pricing, visit our Pricing page.
Footer footnote

Merrill waives its commissions for all online stock, ETF and option trades placed in a Merrill Edge^® Self-Directed brokerage account. Brokerage fees associated with, but not limited to, margin transactions, special stock registration/gifting, account transfer and processing and termination apply. $0 option trades are subject to a $0.65 per-contract fee. Other fees and restrictions may apply. Pricing is subject to change without advance notice.

For broker-assisted trades through Merrill Edge, you will be charged a fee equal to the lower of $29.95 or 5.00% of the principal amount of the transaction. Further, there are indirect fees, such as annual management and other similar fees, that are charged by the manager or sponsor of an exchange-traded fund and of a closed-end fund, as disclosed in the product's prospectus.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Are Not Deposits

Are Not Insured by Any Federal Government Agency

Are Not a Condition to Any Banking Service or Activity

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ETFS Education

Learn about investing in ETFs

Understand the basics of ETFs

What are ETFs?

See what ETFs can do for your portfolio and learn about possible risks.

ETFs Can Offer Investors

Know the Risks Associated with ETFs

Investors Should Consider

What are the different types of ETFs I can invest in?

Fixed Income

Commodity

Equity

Specialty

Sustainable

Common questions about ETFs

What is the difference between an ETF and a stock?

How could fees and expense ratios affect returns?

What other costs are involved in buying or selling a fund?

What are the tax advantages to investing in ETFs?

Want to learn more about ETFs?

Build your investing skillset with online courses

5 Things you should know about ETFs

Getting to Know Exchange Traded Funds

Mutual Funds or ETFs: How do I chose?

ETFs: The innovation of indexes (webinar)

Finding ETFs (webinar)

Our tools can get you started

Learn about a full range of investment topics

Ready to get started?

Call us

Set up a meeting

I'd Like to

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Contact Us

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