An ETF (exchange-traded fund) is a pooled investment fund that holds a basket of securities — such as stocks, bonds, or other assets — and trades on a stock exchange like a single stock.

When you buy a unit of an ETF, you own a proportional share of all the securities the fund holds. ETFs are priced and traded continuously throughout market hours, and most aim to track an index or follow a defined investment strategy. Evolve ETFs are listed on Canadian stock exchanges and held through standard Canadian brokerage accounts.

ETFs trade on a stock exchange throughout the day at market prices, while mutual funds are bought and sold once per day at the closing net asset value (NAV).

ETFs typically have lower management expense ratios (MERs) than equivalent mutual funds and can be more tax-efficient because of their creation/redemption mechanism. ETFs also offer transparency — most publish their full holdings daily — and can be traded with limit orders, stop orders, and other tools available for stocks.

NAV (net asset value) is the per-unit value of an ETF’s underlying holdings, calculated after market close. Market price reflects real-time supply and demand on the exchange and may trade at a small premium or discount to NAV during the day.

Market makers and authorized participants use a creation/redemption mechanism to keep market prices closely aligned with NAV: when a meaningful premium develops, they create new units; when a discount develops, they redeem units. Under normal conditions, premiums and discounts on liquid ETFs are very small.

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). It represents an implicit trading cost.

Highly liquid ETFs typically have very tight spreads, often a single cent. Less-liquid ETFs may have wider spreads, particularly outside of the most active trading hours. Using limit orders rather than market orders can help you control the price you pay or receive.

Passive ETFs aim to replicate the performance of a specific index, holding the same securities in the same weights. Active ETFs are managed by a portfolio manager who selects holdings and adjusts the portfolio with the goal of outperforming a benchmark or meeting a defined objective.

Most Evolve ETFs are actively managed — for example, the UltraYield and Enhanced Yield strategies use active option overlay management to generate distribution income. Some Evolve funds, including thematic and crypto ETFs, follow a rules-based or index-tracking approach. Active ETFs typically have higher MERs than passive index ETFs because of the additional research and management involved.