The main types of ETFs include equity, bond, commodity, and sector ETFs. Learn how each works and how to choose the right ETF for your investment goals.
ETFs come in several main types — including equity (stock) ETFs, bond ETFs, commodity ETFs, and sector or thematic ETFs — each giving you exposure to a different kind of asset. Once you understand what an ETF is, the next step is knowing which type fits your goals.
What are the main types of ETFs?
The main ETF categories are built around the assets they hold:
- Equity (stock) ETFs — hold shares in companies, giving you exposure to a market, region, or industry without buying individual stocks.
- Bond (fixed-income) ETFs — hold government or corporate bonds, generally offering more stability and income than equities.
- Commodity ETFs — track physical goods like gold, oil, or agricultural products, often used to diversify away from stocks and bonds.
- Sector and thematic ETFs — focus on a specific industry (such as technology or healthcare) or a broader theme (such as clean energy).
Each type plays a different role in a portfolio, from growth to stability to diversification.
Index ETFs vs actively managed ETFs
Most ETFs are index ETFs, meaning they passively track a market index — such as the S&P 500 — rather than trying to beat it. A smaller number are actively managed ETFs, where a fund manager makes ongoing decisions about what to buy and sell. This distinction matters mainly for cost and performance: index ETFs typically have lower fees, while actively managed ETFs charge more in exchange for the manager's expertise, with no guarantee of better returns.
How do I choose the right ETF for my goals?
Choosing an ETF starts with your investment goal — growth, income, or diversification — since different ETF types serve different purposes. Your risk tolerance and time horizon also matter: equity ETFs suit longer horizons and higher risk tolerance, while bond ETFs suit investors prioritizing stability. Cost is another factor worth checking, since even small differences in fees compound over time. This is general education to help you think it through, not personalized investment advice.
Building a diversified portfolio with ETFs
Most investors don't rely on a single ETF type — they combine equity, bond, and other ETFs to balance risk and return. The right mix depends on your goals, and that mix typically needs occasional adjustment as markets move. For a closer look at how this works in practice, see our guide on building a diversified ETF portfolio. You can also find a fuller guide to ETF types on our blog.