# Exchange-Traded Product (ETP): Definition, Types, and Example

![Exchange-Traded Product (ETP): Instruments designed to mimic the performance of an index, commodity, or other assets.](https://www.investopedia.com/thmb/AahEjuTlxO_TgK3iyptT_XO7MtM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Exchange-TradedProduct-final-0bb1fe13ee9c4f05902a33c5e137cad2.png)

*Exchange-traded products can be benchmarked to a myriad of investments including commodities, currencies, stocks, and bonds. — Joules Garcia / Investopedia*

> **Definition**
>
> Exchange-traded products trade on exchanges and track underlying securities, indexes, or other financial products.

## What Is an Exchange-Traded Product (ETP)?

Exchange-traded products (ETPs) are financial securities that track underlying securities, an index, or other financial products. ETPs trade on [exchanges](https://www.investopedia.com/terms/e/exchange.asp) similar to stocks, which means they can be bought and sold, and their share prices can fluctuate throughout the trading day. ETP share prices are derived from the underlying investments that they track.

### Key Takeaways

*   Exchange-traded products are instruments that track underlying security, index, or financial products.
*   ETPs trade on exchanges similar to stocks.
*   The price of ETPs fluctuates from day to day and intraday.
*   The share price of ETPs comes 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](https://www.investopedia.com/terms/b/bond.asp). They can contain a few or hundreds of underlying investments. Here are the types of ETPs trading on the market.

### Exchange-Traded Funds (ETFs)

An [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) is a basket of investments that can include stocks and bonds. It usually tracks an underlying index, such as the [S&P 500](https://www.investopedia.com/terms/s/sp500.asp), but can follow an industry, sector, commodity, or even a currency. An ETF's price can rise and fall just like other investments. ETFs trade throughout the day.

Since ETFs are passively managed, they come with low fees, making them popular with investors. A [passively managed](https://www.investopedia.com/terms/p/passivemanagement.asp) ETF may track the S&P 500 index. An ETF that mirrors this index will generally hold all stocks listed on the index, but some funds hold more or less than the index lists, such as Vanguard's S&P 500 ETF, which held 505 stocks on April 30, 2025, while the S&P 500 listed 504.

> **Fast Fact**
>
> In January 2024, the Securities and Exchange Commission (SEC) approved the first Bitcoin Spot ETFs, allowing fund managers to hold Bitcoin and offer exchange-traded shares to investors on official exchanges.

In an [actively managed](https://www.investopedia.com/terms/a/activemanagement.asp) 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.

For example, actively managed ETFs are a hybrid investment vehicle that merges actively managed mutual funds with the trading flexibility associated with ETFs.

### Exchange-Traded Notes (ETNs)

[Exchange-traded notes (ETNs)](https://www.investopedia.com/terms/e/etn.asp), like ETFs, generally track an underlying index and trade on major exchanges. They track unsecured debt securities and are issued as bonds, which pay the return of their original invested amount or principal at [maturity](https://www.investopedia.com/terms/m/maturity.asp) and any generated returns.

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](https://www.investopedia.com/terms/c/credit-worthiness.asp).

Different 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)

[Exchange-traded commodities (ETCs)](https://www.investopedia.com/terms/e/exchangetraded-commodity-etc.asp) 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. As such, investors can capitalize on specific commodities, indexes, or [futures contracts](https://www.investopedia.com/terms/f/futurescontract.asp) without having to store or hold a tangible commodity.  

## Exchange-Traded Products vs. Mutual Funds

[Mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) are typically priced at the end of the trading day when orders are 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.

Differences in the bid and ask price (or 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.

## Pros and Cons of Exchange-Traded Products (ETPs)

Pros

*   Offer investors access to many securities and indices
    
*   Low-cost alternative to mutual funds and actively-managed funds
    
*   Highly popular, providing additional liquidity
    

Cons

*   Risk of market losses since their prices fluctuate
    
*   Come with varying trading volumes, which can affect liquidity
    

> **Fast Fact**
>
> Since the debut of the first ETF in 1993, ETPs have grown significantly in size and popularity. At the end of 2024, global ETFs had almost $1.88 trillion in total assets under management (AUM). 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 ETP

The largest ETF in the marketplace is the SPDR S&P 500 ETF ([SPY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=spy)), with assets of about $604 billion as of May 2025. The ETF owns shares of 504 stocks listed on the S&P. The top five holdings of the company are:

*   Microsoft
*   NVIDIA
*   Apple
*   Amazon
*   Meta  
    

## How Do Exchange-Traded Products Differ From Traditional Investment Options?

ETPs differ from traditional investment options, such as mutual funds, in their structure and tradability. ETP shares are traded on stock exchanges throughout the trading day at market prices, providing intraday liquidity and flexibility. Traditional options often involve buying or selling at the end of the trading day at the NAV price. Additionally, ETPs can track various indices, commodities, or currencies, allowing for more targeted investment strategies.

## Are ETPs Traded on Stock Exchanges?

Yes, ETPs are traded on stock exchanges. This means that investors can buy and sell ETP shares throughout the trading day at market prices. The stock exchange environment enhances [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) and provides real-time pricing information for ETPs.

## How Do Leveraged and Inverse ETPs Work?

Leveraged ETPs seek to magnify the returns of an underlying index or asset class using financial [derivatives](https://www.investopedia.com/terms/d/derivative.asp) and debt. Inverse ETPs, on the other hand, aim to provide the opposite (inverse) performance of the underlying index. These ETPs are designed for sophisticated investors seeking to capitalize on short-term market movements, often contrasting how the ETF is naturally moving.

## What Are the Risks Associated With Investing in ETPs?

Investing in ETPs carries various risks, including [market risk](https://www.investopedia.com/terms/m/marketrisk.asp), liquidity risk, tracking error, and specific risks associated with the underlying assets. Market conditions, geopolitical events, and interest rate changes can impact ETPs' performance. In many ways, an ETP can be considered similar to a stock. Consider all the ways a business can face risk—an ETP is susceptible to similar risks.

## The Bottom Line

ETPs are financial instruments traded on stock exchanges that provide investors with exposure to diverse asset classes such as stocks, bonds, commodities, and currencies. ETPs can be ETFs, ETNs, ETCs, or other vehicles representing structured investment products.

_The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our [warranty and liability disclaimer](https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer) for more info._

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. “[Mutual Funds and Exchange-Traded Funds (ETFs) – A Guide for Investors](https://www.sec.gov/about/reports-publications/investor-publications/introduction-mutual-funds).”
>     
> 2.  Vanguard. "[Vanguard S&P 500 ETF (VOO)](https://investor.vanguard.com/investment-products/etfs/profile/voo#portfolio-composition)."
>     
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>     
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>     
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>     
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>     
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>     
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>     
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>      
> 11.  U.S. Securities and Exchange Commission. "[Updated Investor Bulletin: Leveraged and Inverse ETFs](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/sec)."
>      
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