Part 7

What About Exchange Traded Products?

Exchange-Traded Products (ETPs) are an umbrella term referring to a group of securities that trade similarly to stocks on stock exchanges. You can enter a ticker and buy them in your brokerage account. However, these assets may represent any number of debt securities, commodities, cryptocurrencies in some cases, and other types of investments. These products are essentially intended to give investors exposure to a much wider group of assets than was previously available. We did an entire section on ETFs that you can access here.

The critical thing to remember about this group of assets is that they are not generally representing a single stock or debt security but rather a basket of investments. For example, there may be some ETFs whose purpose is to imitate the price of an underlying commodity.

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However, this really means that you are buying a basket of futures selected to ensure that the exchange-traded product closely mimics the price of whatever it is tied to. This is distinct from mutual funds, which are baskets of investments selected by active managers to outperform the market. Exchange-traded products are generally about mimicking the price of something rather than outperforming it, although there are exceptions. Exchange-traded notes, for instance, are typically comprised of debt securities or even cryptocurrencies and can give investors access to investments they wouldn’t otherwise be able to access on exchanges.

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