What is an ETF? Exchange Traded Funds (ETFs) are growing in popularity as a way for investors to diversify their portfolios with a flexible approach to trading. Toronto Stock Exchange is now home to 527 ETFs from 25 different providers.

So what exactly is an ETF?

Benefits of ETFs

Cost-effective, flexible and transparent, Canadian investors are discovering that ETFs are an investment vehicle with many benefits when building a portfolio.

Indices as Benchmarks

ETFs are often based on an index benchmark — a "basket of securities" that comprises the relative holdings of the product. When using ETFs, it is important to understand how the underlying index or benchmark is constructed.

Types of ETFs

ETF products are always evolving. From passive to active to leveraged, there are now as many different types of ETF products as there are investment styles. That is why it is important to understand the investment objective of each type.

ETF Liquidity and Trading

When trading stocks, greater volume most-often indicates greater liquidity. Investors often assume the same of an ETF — but this is not necessarily the case. An ETF's true liquidity is based on its underlying "basket of securities".

Creation/Redemption and Arbitrage

Ever wonder how ETFs are created and sold? Discover how ETFs use an "in-kind" creation/redemption process to both create and redeem units in response to changes in demand.

Understanding the Risks

When considering an ETF as an investment, as with any other investment vehicle, risk will be involved. Understanding how an ETF is created is important when determining your risk tolerance.

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