ETF Investing: Types of ETFs

Bond ETFs

Bond ETFs, also known as fixed-income ETFs, give investors access to many bonds in a single trade. They are often used by investors seeking regular income and to help add stability to a portfolio.

What is a bond?

A bond is essentially a loan. When you buy a bond, you lend money to a company or a government for a set period of time.

In return, they typically pay you interest. At the end of the agreed period, known as the maturity date, you receive your original investment back.

A bond ETF lets you invest in lots of different bonds in one simple purchase, helping you spread your investment across multiple bond issuers.

However, unlike a single bond, most bond ETFs don’t have an end date. When the bonds inside them mature, they’re replaced with new ones. So your investment keeps going.

Commodities ETPs

Commodities are any raw materials used throughout the global economy. These include precious metals like gold and silver, energy products such as oil, and agricultural goods like wheat or coffee.

Just like shares and bonds, commodities are another type of asset that investors may include in their investment portfolio – often to add diversification because commodity prices can behave differently from stock and bond markets.

There are different ways to gain exposure to commodities in your investments. One of the simplest is through Exchange Traded Commodities, or ETCs.

An ETC works in a similar way to an ETF, but instead of tracking a basket of shares or bonds, they typically aim to track the price of a specific commodity, such as gold or oil. The value of an ETC will rise and fall with the price of the underlying commodity.

Digital Assets

Digital assets can be anything non-physical that exists online and can create value – think cryptocurrencies, tokens, and blockchain-based assets.

Typically, when people hear the term crypto, they often think of bitcoin – the world’s first widely accepted cryptocurrency – which can be accessed via an ETP (Exchange-Traded Product).

An ETP is similar to an ETF in that it trades on a stock exchange and can be bought and sold through a regular investment account. However, unlike most ETFs — which usually hold a basket of investments — a crypto ETP typically tracks a single asset, such as bitcoin.

Importantly, the ETP provider handles the storage and security of the underlying bitcoin. This means investors do not need to set up crypto wallets or manage private keys themselves, making it a more straightforward way to access digital assets.

It’s important to note that cryptocurrencies are highly volatile and may not be suitable for all investors.