section header ETF fundamentals
subsection header Management
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Index ETFs
Index ETFs aim to track the returns of a specific market index by holding all or a representative selection of securities in the index.
Most ETFs aim to track market-cap-weighted indexes and are available in an increasing number of styles and asset classes, including regional and global equity and fixed income. They range from products that invest in the widest coverage of the markets, to those that invest in specific industries.
Some ETFs cover the growth and value style spectrum, and others track certain market-capitalization ranges. International ETFs cover the global markets and may offer exposure to a single country or region of the world. Finally, fixed income ETFs can cover a variety of duration, credit quality and maturity ranges.
Market capitalization: The traditional weighting methodology
An index is a group of securities chosen to represent an unbiased view of the risk-reward attributes of a market or portion of a market. Vanguard believes that indexes should be constructed according to the market capitalization of the underlying constituents.
Most ETFs weight their underlying securities according to their market capitalization. Market-cap-weighted indexes reflect the consensus estimate of each company's value at any given moment. In any open market, new information—economic, financial or company-specific—affects the price of one or more securities and is reflected instantaneously in the index via the change in its market capitalization.
Basics
Learn the basics of ETFs, including their history, how they compare to mutual funds, what types are available and more.
Trading
Learn about ETF trading, common order types, premiums and discounts, liquidity considerations and more.
Strategies
Learn about strategic and tactical uses for ETFs, including asset and sub-asset allocation, portfolio completion, cash equitization and more.
Commissions, management fees, and expenses all may be associated with investment funds. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard funds are managed by Vanguard Investments Canada Inc. and are available across Canada through registered dealers.
This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy. Any views and opinions expressed do not take into account the particular investment objectives, needs, restrictions and circumstances of a specific investor and, thus, should not be used as the basis of any specific investment recommendation. Investors should consult a financial and/or tax advisor for financial and/or tax information applicable to their specific situation.
All investment funds, including those that seek to track an index are subject to risk, including the possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market. While the Vanguard ETFs are designed to be as diversified as the original indices they seek to track and can provide greater diversification than an individual investor may achieve independently, any given ETF may not be a diversified investment.
All monetary figures are expressed in Canadian dollars unless otherwise noted.