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STRUCTURAL CHARACTERISTICS
ETF Holdings and Transparency |
ETF Holdings and Transparency PDF |
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Holdings: Is it "Replication" or "Representation"?
Not every ETF invests in every single security that comprises
its underlying index, although many do.
“Replication” refers to a strategy whereby an ETF or index
fund manager attempts to invest in all, or virtually all, of the
exact same securities included in the underlying index.
Large indices that include hundreds or thousands of securities,
as well as those that include thinly traded or certain
small- or micro-cap stocks, can sometimes be challenging
and costly to replicate exactly. Consequently, managers
sometimes use a representative strategy that entails holding
an abbreviated basket of securities.
A “representation” approach (sometimes called “sampling”)
utilizes optimization techniques that attempt to closely mirror
the composition, market exposure and performance of the
underlying index without necessarily holding each and every
component security.
In order to know an ETF’s holdings, it is smart to understand
which strategy individual ETFs employ.
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This information is subject to change at any time and should not be construed as a recommendation of any specific security
or strategy.
This information does not constitute tax advice. Please consult your tax advisor and/or state and local tax offices for more
complete information.
Securities are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks,
including the possible loss of the principal amount invested.
RydexShares™ are distributed by Rydex Distributors, Inc., an affiliate of Rydex Investments.
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