Page 190 - A Canuck's Guide to Financial Literacy 2020

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legal claim on the shares held in trust. Once these units are in hand of the authorized
participant, they’re sold in the public market similar to stocks.

Types of ETFs

Since the inception of the first ETF, the S&P 500 SPDR, in 1993, the number of ETFs and
their values have grown dramatically, to over $50 trillion. There are many types of ETFs and
below we’ll discuss the most common one’s you might run into.

▪ Index ETF

Index ETFs are constructed to track the performance of an index. This could include
ETFs that tracks the overall market such as the S&P 500 or ETFs that track a section
of the market such only small cap or large cap companies. Index ETFs aim to perform
at the same level as the underlying index that it’s tracking. You might run into slight
discrepancies as index ETFs are not able to produce a return exactly as 100% of the
underlying index due to tracking error, discussed below.

▪ Commodity ETFs

Commodity based ETFs invest in physical commodities such as gold, oil, agricultural
goods and so on. To gain exposure to these commodities, you may either do so
through a physical commodity ETF or a Equity Commodity ETF.
▪ Physical commodity ETFs such as, SPDR Gold Trust, own the underlying
commodity. Investors who buy these types of ETFs have an ownership stake in
the underlying asset or commodity.