what is an exchange traded product etp 
exchange traded products etps are instruments that track underlying securities an index or other financial products etps trade on exchanges similar to stocks meaning shares can be purchased and prices can fluctuate throughout a trading day etp share prices are derived from the underlying investments that they track types of exchange traded products etps exchange traded products can be benchmarked to myriad investments including commodities currencies stocks and bonds etps can contain a few or hundreds of underlying investments here are the types of etps trading on the market similar to a mutual fund an exchange traded fund contains a basket of investments that can include stocks and bonds an etf usually tracks an underlying index such as the s p 500 but it can follow an industry sector commodity or even a currency an exchange traded fund s price can rise and fall just like other investments contrasted with mutual funds that can only be traded after hours these products trade throughout the day 1the popularity surrounding etfs stems from their low fees since many are passively managed for example a passively managed etf might track the s p 500 index one of the most popular large cap stock indexes an etf that mirrors the s p 500 will generally hold all stocks listed on the index but some funds hold more or less than the index lists an example is vanguard s s p 500 etf which held 505 stocks on feb 1 2024 while the s p 500 listed 503 23in january 2024 the securities and exchange commission approved the first bitcoin spot etfs allowing fund managers to hold bitcoin and offer exchange traded shares to investors on official exchanges 4in an actively managed fund which an etf can also be the fund manager is responsible for maintaining fund performance by replacing non performers with better performers which can lead to higher fees the managers need to be paid for their time and there might be some trading fees to pass on some etfs share a combination of both passive and active attributes 5for example actively managed exchange traded funds are a hybrid investment vehicle that merges actively managed mutual funds with the trading flexibility associated with etfs exchange traded notes etns like etfs generally track an underlying index and trade on major exchanges however they track unsecured debt securities and are issued as bonds etns are issued as bonds which pay the return of their original invested amount the principal at maturity and any returns generated etns do not pay periodic interest payments called coupon payments as a result the likelihood that investors will be paid back the principal and the returns from the underlying index depends on the issuer s creditworthiness 6different tax treatments apply to the various types of etps investors should speak with a tax professional for any potential tax ramifications from investing in etps exchange traded commodities etcs are financial instruments designed to offer investors exposure to commodity prices these instruments can be structured as either etfs or etns etcs are traded on stock exchanges allowing investors to easily access and trade them just like they were individual stocks the underlying assets of etcs typically include a range of commodities such as precious metals agricultural products energy resources or a combination thereof etcs let investors buy and sell commodities without holding or owning any of the underlying commodities this means investors can capitalize on specific commodities commodity indices or commodity futures contracts without ever having to store or hold a tangible commodity 7exchange traded products vs mutual fundsmutual funds are typically priced at the end of the trading day when orders are actually filled etp shares trade like stocks with price movements throughout the day for example an investor can place a buy or sell order for an etf share at a specific price with a broker or buy the etf in the morning and sell it by the end of the day mutual funds can be purchased and sold during the day but are not priced until the market closes etps also often carry lower expense ratios than their mutual fund counterparts 1additionally differences in the bid and ask the buy and sell price could add to the cost of trading etps some no load or no fee mutual funds on the other hand can be bought and sold without any trading commission etps offer investors access to many securities and indices etps are usually a low cost alternative to mutual funds and actively managed funds many etps particularly etfs are gaining in popularity providing additional liquidity etps have the risk of market losses since their prices fluctuate etps are popular products but have varying trading volumes which can affect liquidity growth of exchange traded productssince the debut of the first etf in 1993 etps have grown significantly in size and popularity 8 at the end of 2023 global etfs had almost 11 trillion in total assets under management aum 9 the low cost structure of etps has contributed to their popularity which has attracted assets and capital away from actively managed funds real world example of an etpthe largest etf in the marketplace is the spdr s p 500 etf spy with assets of more than 480 billion as of january 2024 the etf owns shares of all 500 stocks listed on the s p here are a few of the top companies held by spy 10