Northern Trust is a pioneer in the servicing of European exchange traded funds (ETFs) and a recognised industry leader.

Bottom Line. ETFs and investment trusts are investment vehicles that can help investors diversify their portfolio and potentially earn a good return over time. ETFs are open-ended and often passively managed, while investment trusts are closed-ended and actively managed.

An ETF (exchange-traded fund) is an investment that's built like a mutual fund - investing in potentially hundreds, sometimes thousands, of individual securities - but trades on an exchange throughout the day like a stock.

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.

Unlike an ETF's or a mutual fund's net asset value (NAV) - which is only calculated at the end of each trading day - an ETF's market price can be expected to change throughout the day. (A mutual fund doesn't have a market price because it isn't repriced throughout the day.)

Conservative ETF List

Since ETFs are more diversified, they tend to have a lower risk level than stocks. Similar to stocks, ETFs can be bought and traded at any time and they are also taxed at short-term or long-term capital gains rates. The assets inside an ETFs are bought and pooled together by the fund's managers.

Advantages of investing in ETFs ETFs allow you to buy one fund and have a stake in dozens or even thousands of companies. Because of this broad ownership, ETFs offer the power of diversification, reducing your risk and increasing your returns.

Vanguard's unique cost structure, the economies of scale it has achieved, and the total number of assets under management (AUM) allow it to offer its ETFs at the lowest cost available in the market. We've listed 10 of the firm's cheapest ETFs by their expense ratio.

Vanguard's ETF offerings can also offer some significant advantages over the firm's lineup of mutual funds. "ETFs are a good investment option as they offer diversification, low costs and the ability to trade shares during the trading day," says Lauren Wybar, senior wealth advisor at Vanguard.

There are many ways an ETF can stray from its intended index. That tracking error can be a cost to investors. Indexes do not hold cash but ETFs do, so a certain amount of tracking error in an ETF is expected. Fund managers generally hold some cash in a fund to pay administrative expenses and management fees.

Two of the most popular ETFs include index funds based on the Standard & Poor's 500 index and the Nasdaq 100 index, which contain high-quality businesses listed on American exchanges: Vanguard S&P 500 ETF (VOO), with an expense ratio of 0.03 percent. Invesco QQQ Trust (QQQ), with an expense ratio of 0.20 percent.

ETFs can offer lower operating costs than traditional open-end funds, flexible trading, greater transparency, and better tax efficiency in taxable accounts. For nearly a century, traditional mutual funds have offered many advantages over building a portfolio one security at a time.

Key differences between stocks and ETFs Stocks represent a piece of ownership in a publicly traded company. ETFs are a bundle of assets and securities such as different stocks and bonds. A single ETF can contain dozens or hundreds of different stocks, or bonds or almost anything else considered an investable asset.

The single biggest risk in ETFs is market risk.

Aggressive Growth ETF List