Personal Finance
Personal Finance
Exchange-Traded Funds

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Exchange-traded funds (ETFs) are baskets of stocks or bonds designed to closely track the composition and performance of a market index.

With an ETF, you can buy a whole portfolio of stocks or bonds in one security transaction - just as easily as you would buy an individual stock or bond. Like mutual funds, ETFs allow you to own a portfolio of securities, but similar to individual stocks allow you the increased flexibility of intra-day trading.

Do ETFs offer other advantages over mutual funds?

Exchange traded funds tend to be less expensive than traditional mutual funds with expense ratios typically ranging between .07 - 1.19%. In addition to being highly liquid and tradable in real time, they may offer better tax efficiency than mutual fund investments. Exchange traded funds can be sold short or bought on margin, which may increase your flexibility in pursuing a wider range of investment strategies.

Can exchange-traded funds replicate any index?

There are exchange-traded funds to track most major indices and PNC offers you access to over 100 different funds. Like index funds, exchange traded funds are passively managed and designed to track the price performance and dividend yield of the underlying index.

Who invests in exchange-traded funds?

Institutional and individual investors alike have found exchange-traded funds to offer liquid and cost-effective exposure to a broad range of asset classes. For short-term investors, an exchange-traded fund can provide an attractive alternative to money market funds. ETFs can also provide investors with diversified exposure to a specific industry, sector or group of stocks in a single investment, and do so with a low cost, passive approach.

If you're looking for a cost efficient alternative to passively managed index funds, speak to your PNC advisor about exchange-traded funds and how they might help you meet your investment objectives.

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