The growth of Exchange Traded Funds (ETFs) has caused significant change in the investment industry. This article identifies a few of the new investment techniques and strategies that have been either affected or enhanced, by the proliferation of ETFS. This article assumes some rudimentary knowledge of the Capital Asset Pricing Model (CAPM) methodology and also of some elementary hedge fund strategies.

In future, new investment techniques will increasingly be created using these methods.

What are Exchange Trade Funds?

According to the Securities and Exchange Commission (SEC), ETFs are listed companies whose purpose is to mimic an index, asset class or even investment style. Within index ETFs, they offer a low cost option to achieve exposure to that index. They also give a way to achieve diversified exposure to an index, but with only having to buy one stock. They are seen as being suitable for retirement investors who want diversified and low cost exposure to an index.

Growth in Commodity ETFs

Index funds exist to track global equity indices like the S & P 500, Russell 2000, Hang Seng, and Nikkei. Similarly, exchange traded funds have been created to track Equity Sector indices, such as Oil Services companies or Pharmaceuticals. Asset class ETFs offer exposure to all major asset classes, such as fixed income ETFs, property, currencies, and commodities.