Products & Vehicles
The exposure matters, but so does the wrapper you buy it in.
This category explains how each vehicle is constructed, across the explainers on ETF structure and the creation and redemption mechanism, premiums and discounts, mutual funds and expense ratios, and closed-end funds, then American Depositary Receipts, SPACs, business development companies, and master limited partnerships.
IWP Concepts shows how each structure changes cost, tax, liquidity, and tracking, because choosing the right wrapper is often as consequential as choosing the underlying asset.
Use it to understand the funds and structures that package nearly everything an investor can hold, and to avoid paying for a structure that quietly works against you.
An exchange-traded fund, or ETF, is a pooled investment vehicle whose shares trade on a stock exchange throughout the…
A mutual fund is a pooled investment vehicle that takes money from many investors, buys a portfolio of securities, and…
The expense ratio is the annual cost of owning a mutual fund or ETF, stated as a percentage of assets. It is deducted…
Exchange-traded funds and mutual funds both pool investors' money into a single diversified portfolio. The difference…
Every exchange-traded fund shares the same plumbing: a basket of assets that trades on an exchange like a single stock.…
Both structures pool investor money and hold a professionally managed portfolio, but they differ in one decisive way:…
A money market fund and a high-yield savings account both promise a competitive yield on cash you want to keep safe and…
Two ETFs can track the exact same index and hold the exact same stocks, yet treat the dividends those stocks pay in…
Creation and redemption is the behind-the-scenes process that lets ETFs track the value of their underlying holdings…
An ETF's market price and its net asset value (NAV) are two different numbers. When the market price is higher, the ETF…
A closed-end fund (CEF) is a registered investment company that issues a fixed number of shares in an initial public…
A SPAC is a publicly traded shell company that raises cash in an IPO with the sole purpose of buying a private business…
A Business Development Company is a publicly traded fund that lends to, and sometimes invests in, small and mid-sized…
A Master Limited Partnership is a publicly traded partnership, most often in energy infrastructure, that passes its…
A target-date fund is a single fund that holds a diversified mix of stocks and bonds and gradually shifts toward bonds…
A structured note is a debt security whose payoff is tied to an underlying index, stock, basket, or rate rather than a…
A money market fund is a mutual fund that invests in short-duration, high-quality debt so it can aim for a stable share…
A leveraged ETF aims to deliver a multiple (2x or 3x) of a benchmark's **daily** return. An inverse ETF aims to deliver…
The same mutual fund can be sold under several "share classes," each with a different fee structure. Class A, Class B,…
Every ETF trade happens in one of two places. The **primary market** is where authorized participants create and redeem…
A 529 plan is a state-sponsored, tax-advantaged investment account designed to pay for education expenses.…
A health savings account is a tax-advantaged account paired with a high-deductible health plan. It offers three layers…
A Series I savings bond is a U.S. Treasury savings bond whose yield combines a fixed rate set at issue with a variable…
A Series EE savings bond is a non-marketable U.S. Treasury security that earns a fixed interest rate and carries a…
A municipal money market fund holds short-term debt issued by states, cities, and other public entities, with income…
A prime money market fund holds short-term corporate debt such as commercial paper and certificates of deposit…
The expense ratio is the number funds advertise, but it is not the number you actually pay. Total cost of ownership…
Two ETFs can track the same index and hold almost nothing in common. A physical ETF buys the actual securities; a…
Physical replication is the method most stock and bond ETFs use to track an index: the fund buys and holds the real…
A synthetic ETF tracks an index without owning the index's constituents. Instead of buying the underlying stocks or…
A business development company, or BDC, is a publicly registered closed-end fund that lends to and takes small equity…
A master limited partnership is a publicly traded partnership that combines the pass-through tax treatment of a private…
A closed-end fund, or CEF, trades at a price set by the market, not at net asset value. The gap between that price and…
An interval fund is a registered closed-end fund that does not trade on an exchange. Instead, it offers shareholders…
A unit investment trust, or UIT, is a fixed portfolio of securities packaged into redeemable units and sold to…
Closed-end fund arbitrage is the practice of buying CEF shares trading at a deep discount to net asset value and…
Leveraged ETFs target a multiple of an index's **daily** return, not its long-term return. Because the fund rebalances…
An inverse ETF is an exchange-traded fund designed to deliver the opposite of an index's **daily** return. A -1x S&P…
TIPS are marketable Treasury bonds whose principal adjusts with the Consumer Price Index, so coupon payments rise and…
A Treasury bill auction is the weekly process by which the U.S. Treasury sells short-term debt to investors. T-bills…
Treasury STRIPS are zero-coupon Treasury securities created by separating a coupon-bearing Treasury note or bond into…
A zero-coupon bond pays no periodic interest. It is sold at a deep discount and redeemed at face value at maturity,…