ETFs as financial instruments

Futures are no longer the uncontested low-cost beta instrument.

Compare the costs of ETFs and futures

Download our full cost comparisons and see how ETFs stack up against futures.

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ETFs or futures? Which is right for me?

An ETF allocation may generally be appropriate for buy-and-hold investors seeking long equity market exposure and requiring less than 3x leverage. The flow chart below represents the basic considerations current users of futures should evaluate when determining if an ETF might be a better alternative to a futures position.

Is an ETF appropriate for my investment objectives?

For illustrative purposes only.

Key suitability considerations

1

DIRECTION
Generally, futures will be a less expensive vehicle for investors desiring short exposure. For long positions, an ETF can be a lower-cost option.

2

HOLDING PERIOD
Futures contracts have to be rolled at least once a quarter, exposing investors to roll risk. ETFs have a predictable cost structure based on a management fee and do not need to be rolled, which can make them a viable option for long-term holders.

3

LEVERAGE
Blending ETFs and futures positions can help achieve a desired level of leverage while limiting exposure to roll. For non-levered, buy-and-hold investors, ETFs may be an operationally simple and low-cost replacement for futures.