ETF Education
Our ETF education page is designed to provide you with all the information you need to understand and invest in exchange-traded funds.
What are ETFs?
An ETF (Exchange Traded Fund) is a investment fund that holds assets such as stocks, commodities, or bonds and is traded on a stock exchange.
An ETF (Exchange Traded Fund) is a type of investment vehicle that holds a collection of assets such as stocks, commodities, or bonds. ETFs are traded on stock exchanges and can be bought and sold like individual stocks. They offer investors a convenient, tax efficient and cost-effective way to diversify their portfolio and gain exposure to a wide range of markets and asset classes.
A Popular Investment Vehicle
ETFs have become popular investment vehicles in the US and globally.
$8.3 tr.
Global ETFs AUM
10,000+
ETFs listed globally
$20 tr.
Projected Global ETFs AUM by 2026
$6.7 tr.
US-listed ETFs AUM
3,000+
US-listed ETFs
$13 tr.
Projected US-listed ETFs AUM by 2026
How ETFs Work
Understanding the process of creating and redeeming ETF shares is important in understanding how ETFs operate. This process plays a key role in minimizing the spread between the ETF price and its net asset value (NAV) and providing a unique source of liquidity and tax efficiency for investors.
Creation Process
Redemption Process
How ETFs are managed?
ETFs can be passively or actively managed. The main difference in practice is the extent of active involvement and discretion that can be applied to managing the portfolio.
Passive Management
Passive management, also known as index investing, involves tracking a market index, such as the S&P 500, and attempting to replicate its performance.
Active Management
Active management requires a portfolio manager to actively trade securities based on a process/framework that may also incorporate factor analysis and risk management.
Key Reasons to Consider Active Management
ETFs can be passively or actively managed. The main difference in practice is the extent of active involvement and discretion that can be applied to managing the portfolio.
Investment Expertise
Investment analysts leverage investing and industry expertise to determine the optimal portfolio allocation for the ETF, incorporating qualitative and quantitative factors.
Security Selection
Discretionary investment management allows for optimizing security selection to fit the investment strategy criteria.
Risk Management
Active management empowers an investor with the flexibility to manage risk carefully and anticipate future challenges.
Shareholder Engagement
Active managers can engage with company management of portfolio positions to drive accountability, unlock value and affect change.
ETFs can be deemed an attractive alternative to individual stocks and mutual funds
Features
ETFs
Basket of assets (e.g. stocks, bonds, commodities).
Mutual Funds
Basket of assets (e.g. stocks, bonds, commodities).
Stocks
Individual companies.
ETFs
Can be traded intraday on exchange.
Mutual Funds
Can be traded at the end of day.
Stocks
Can be traded intraday on exchange.
ETFs
Offer intraday liquidity on exchange, similar to stocks.
Mutual Funds
Typically less liquid than stocks, as the fund’s NAV is calculated once daily at market close.
Stocks
Can be traded intraday on exchange.
ETFs
Can offer diversification across themes and asset classess.
Mutual Funds
Can offer diversification across themes and asset classess.
Stocks
Less relevant for single stocks which tend to focus on individual companies.
ETFs
The minimum investment is tied to the cost of a single share of the ETF.
Mutual Funds
The minimum investment is typically tied to a minimum fixed amount, starting as low as $500.
Stocks
The minimum investment is tied to the cost of a single share of the company and in some jurisdictions investors can also buy fractional shares.
ETFs
ETFs usually charge a single unitary fee covering all costs including management fee and fund expenses.
Mutual Funds
Mutual funds generally charge higher fees in totality because in addition to management fees, the costs of running the fund are also charged to investors. Fee structures are less transparent.
Stocks
No fees apply, apart from any potential trading costs.
ETFs
ETFs are more tax efficient than mutual funds because they are able to minimize capital gains distributions by using a process called in-kind redemption, which is tax exempt.
Mutual Funds
The mutual fund creation and redemption process can lead to greater realized capital gains and more capital gains distributions, which can be tax inefficient for investors.
Stocks
Capital gains tax on individual stocks is dependent on the holding period and the investor's own tax position.
What can you invest in with ETFs?
Some ETFs are designed to provide broad-based exposure to a particular market or sector, while others are more focused on a specific theme or investment strategy.
Equities
ETF that invest in the stocks of companies.
Fixed Income
ETF that invest in bonds, which are debt securities issued by governments, municipalities, and corporations.
Commodities
ETF that provide exposure to commodities, such as gold, oil, or agricultural products.
Real Estate
ETFs that hold real estate investment trusts (REITs) and provide investors with access to a diversified portfolio of properties
Currencies
ETFs that invest in foreign currencies allow investors to gain exposure to the movements of specific currencies, such as the euro or the Japanese yen
Cryptocurrencies
ETFs that track the price of cryptocurrencies such as Bitcoin or Ethereum.
Geographical Group
ETFs that invest in markets that share similar economic status or growth trajectory such as emerging markets
A Country
ETF that invests in the stocks of companies based in a specific country.
A Sector
ETF that invests in the stocks of companies within a specific industry or sector of the economy such as energy or healthcare
A Theme
ETFs that invest in a specific theme or sector, such as renewable energy or reshoring.
Factors
ETF that invest in stocks that exhibit certain characteristics, or "factors," such as value, growth, or dividends
ESG
ETF that invest in companies that meet certain standards for environmental sustainability, social responsibility, and corporate governance.
Risk Information
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus or summary prospectus, which may be obtained by visiting www.temaetfs.com. Read the prospectus carefully before investing.
Diversification does not ensure profits or prevent losses.
Investing involves risk including possible loss of principal. The Funds may invest a significant portion of their assets in one or more sectors and thus will be more susceptible to the risks affecting those sectors than funds that have more diversified holdings across a number of sectors. There is no guarantee the adviser’s investment will be successful in identifying and investing in thematic trends.
The small- and mid-capitalization companies in which the Funds invest may be more vulnerable to adverse business or economic events than larger, more established companies, and may underperform other segments of the market or the equity market as a whole.
The Tema Alternative Investment Managers ETF prospectus was filed with the SEC on August 31st, 2022. Investing in the fund is not yet possible. Please see a copy of the prospectus linked here.
International and emerging market investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Frontier markets generally have less developed capital markets than traditional emerging market countries, and, consequently, the risks of investing in foreign securities are magnified in such countries.
Because the Funds evaluate ESG factors to assess and exclude certain investments for non-financial reasons, the Funds may forego some market opportunities available to funds that do not use these ESG factors.
Adviser: Tema Global Limited
Distributor: Foreside Fund Services, LLC.
The information on this website does not constitute investment advice or a recommendation of any products, strategies, or services. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. Tema Global Limited or its affiliates, nor Foreside Fund Services, LLC, or its affiliates accept any responsibility for loss arising from the use of the information contained herein.