What is an ETF?

An ETF, or Exchange Traded Fund, is a basket of securities such as stocks and/or bonds that are held in a single fund that is bought or sold on an exchange. Over the last 20 years, ETFs have become popular primarily because they provide transparent, affordable access to a wide array of investment strategies.

Some Characteristics of ETFs

ETFs include some characteristics of stocks and other qualities inherent to mutual funds, making them a unique investment structure, offering benefits such as:

  • Diversification: Investors own a diversified portfolio of stocks and/or bonds in a single fund which is professionally managed. 
  • Intra-Day Trading: Similar to stocks, ETFs can be bought and sold throughout the day on an exchange. Investors can place various types of orders, including limit and stop-loss orders. Mutual fund shares settle after the market has closed.
  • Cost: The management fees for index-tracking ETFs are often lower than mutual funds, but investors may pay a brokerage commission each time they buy or sell an ETF.
  • Investment Minimums: ETFs have no investment minimum, with exception to the cost to purchase a single share. Mutual funds typically have an investment minimum.
  • Transparency: ETFs disclose all of the portfolio’s holdings on a daily basis, allowing investors to know exactly what they own. Mutual funds typically post holdings on a quarterly basis.

Types of ETFs from Franklin Templeton

Franklin Templeton offers a variety of equity and fixed-income ETFs to fit the investment requirements and risk tolerance of many investors.

Passive ETFs

Also known as traditional index-based ETFs, these seek to track an index (typically market-cap weighted) in order to capture the risk and return of a given market. Investors and advisors may use passive ETFs to precisely target exposure at a low cost.

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Smart Beta ETFs

Similar to passive ETFs, smart beta ETFs seek to track an underlying index that is constructed using a transparent and rules-based process. However, the underlying indexes for smart beta ETFs are typically not market-cap weighted. Instead, they are designed with a desired outcome in mind, such as lowering drawdowns during heightened periods of market volatility or pursuing stronger risk-adjusted returns versus a broader investment universe.

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Active ETFs

Instead of seeking to track an index, the portfolio managers invest opportunistically outside the benchmark using fundamental research and expertise. Investors may use active ETFs to seek potential outperformance of the broader market.

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Franklin Templeton offers a broad range of ETFs that track a variety of asset classes, including equity and fixed income. Here’s a selection of a few of our ETFs:

For a full list of our ETFs, including recent prices and investment performance, click here.

How Do I Invest in ETFs?

Talk with your financial adviser about adding a LibertyShares ETF to your portfolio or purchase an ETF directly through an online brokerage account.