An ETF owns a share price allowing it to transact easily in exchanges the whole day, thus the name of it is a marketable security. People could also short sell an ETF. In the U.S. for instance, most forms of ETF are open-ended funds. Thus, it is subject to the Investment Company Act of 1940 but there are no subsequent rules modifying the regulatory requirements. Moreover, in open-ended funds, there is no limit on how many investors are involved in the product.
There are types of marketable securities ETF available on the market recently. The first is the passive and active ETFs. Basically, ETFs category relies on whether or not it is passive or active. Passive ETFs replicate the performance of broad index like S&P 500 or could be in a specific sector. The epitome would be gold stocks. Active ETF on the other hand do not target index of securities. Thus, it refers to the decisions from portfolio managers.
Second is bond ETFs. Bond ETFs provide regular income to investors. But, their performance relies on the underlying bonds. This covers corporate, government, state and local bonds. These bonds are municipal bonds. Third is stock ETFs. In Stock ETFs, there is a basket of stocks tracking one industry or sector. This is like tracking automotive or foreign stocks. The goal of stock ETFs is to get diversified exposure in one industry including high performance and potential growth.
The fourth is the industry sector, here ETFs aim at the specific sector or industry. In the energy sector for instance, the ETF would cover companies operating in this sector. The goal for industry ETF is to get exposure to the upside of the industry. It means that it could track performance since they do not involve direct securities ownership.
