Exchange-traded funds (ETFs) are investment vehicles that bundle securities into diversified pools. They are bought and sold on an exchange, like a stock, giving investors access to markets and their money throughout the trading day.
The growth of ETFs has meant that different types of ETFs are now available including passive and active ETFs. While passive ETFs aim to replicate the performance of an underlying index such as the S&P 500, active ETFs are designed to outperform a benchmark or achieve a specific outcome and we see demand for active ETFs surging.
As actively managed ETFs gather pace, we look at the similarities and differences to their passive peers in our ETFs Explained series. In this episode, we will delve into the common features of active and passive ETFs.